You don't want to get audited, do you? So stop claiming those crazy deductions. Don't claim your neighbor's kids, the cat, or your new sports car as a business deduction! I know this seems like common sense, but people ask me if they can claim these off the wall things all the time.
Audit Red Flags
The IRS looks out for the following Audit Red Flags before they send an Audit Notice.
Unusual Deductions: Taxpayers who make large and unusual deductions are easily spotted.
Income: Here are some indicators the IRS looks out for...
• Lots of round numbers on a report, like $1,000.00 or $100.00
• Income that doesn't fit with the price of living for your neighborhood or area
• A Drastic change in income from one fiscal year to the next
• Incomplete Returns
Medical Deductions must exceed a certain amount of your income or they can not be claimed.
Charity deductions: Receipts may not be enough to prove Charity Deductions. If large amounts were donated you need to obtain a letter from the charity detailing the donation for your records.
Office/Business Deductions: Many taxpayers get into trouble by claiming office deductions on items that do not qualify. Office supplies like computers, programs, and tools of the trade count, luxury cruises and cars do not. The IRS can easily spot the difference.
And as always...if you're not sure about something, double check with a certified professional first. Have a happy and safe weekend everyone!
Labels: Business Tax, Children and Tax Debt, Medical Deductions