The Top 5 IRS Attention Grabbers
With a struggling economy and ballooning national deficit, it won't be surprising for the IRS to squeeze out every penny that is owed to them, for good reason.
It is estimated that the gap between IRS receivables and actual collections is somewhere in the vicinity of $400 billion.
With that, you can expect an expect an increase in the number of IRS case audits.
The IRS makes a big secret of whose returns it will audit, but there are things that will increases the odds of you being audited by the IRS, and you're going to have to explain yourself to the tax man.
A Six-Figure Income It is what most Americans would love to have, but earning a six-figure income every year increases the odds of you catching the unwanted attention from IRS auditors.
There are apparently two reasons for this: * The more income you have, the more valuable the errors in your tax reporting.
In an apples to apples comparison, it is definitely more interesting to go after errors to the tune of tens of thousands of dollars than a few hundred dollars.
* People with higher incomes tend to own properties that would make for a complicated tax return.
These include businesses, properties for rent, investment portfolios, among others.
And the more complicated the tax return, the higher the chances of tax return mistakes.
Home Office Deductions Owning a home-based business and declaring home office deductions does increase your chances of getting audited by the IRS.
Why? Because there's the tendency for home business owners to claim home office deductions for their personal expenses.
That said, although you have every right to take self-employment deductions, make sure every deduction you claim is legitimate and well-documented.
Charitable Donations In the past it was held that you can deduct $500 from your taxes for charity without any documentation is no longer true.
The IRS now requires all donations to charity be accompanied by written verification from the charity or your bank.
Donating over 10% of your income may get you commendation for generosity but you should be ready to prove it to an auditor.
If you're donating in kind, like donating a car with a value of $5,000, the IRS requires an appraisal on the car to back-up your claim.
Unusually High Expenses Unusually high expenses like steep medical bills can make you a candidate for IRS auditing.
If you have such a high medical bill, it's always a good idea to send some documentation along with your return.
Filing a Sloppy Tax Return Filing an incomplete return or a return that is hard to read will invite extra attention from the IRS.
Preparing tax returns on a computer with a tax preparation software eliminates errors in tax filing, and wards off any unwanted attention.
Don't forget to sign your tax returns.
It is estimated that the gap between IRS receivables and actual collections is somewhere in the vicinity of $400 billion.
With that, you can expect an expect an increase in the number of IRS case audits.
The IRS makes a big secret of whose returns it will audit, but there are things that will increases the odds of you being audited by the IRS, and you're going to have to explain yourself to the tax man.
A Six-Figure Income It is what most Americans would love to have, but earning a six-figure income every year increases the odds of you catching the unwanted attention from IRS auditors.
There are apparently two reasons for this: * The more income you have, the more valuable the errors in your tax reporting.
In an apples to apples comparison, it is definitely more interesting to go after errors to the tune of tens of thousands of dollars than a few hundred dollars.
* People with higher incomes tend to own properties that would make for a complicated tax return.
These include businesses, properties for rent, investment portfolios, among others.
And the more complicated the tax return, the higher the chances of tax return mistakes.
Home Office Deductions Owning a home-based business and declaring home office deductions does increase your chances of getting audited by the IRS.
Why? Because there's the tendency for home business owners to claim home office deductions for their personal expenses.
That said, although you have every right to take self-employment deductions, make sure every deduction you claim is legitimate and well-documented.
Charitable Donations In the past it was held that you can deduct $500 from your taxes for charity without any documentation is no longer true.
The IRS now requires all donations to charity be accompanied by written verification from the charity or your bank.
Donating over 10% of your income may get you commendation for generosity but you should be ready to prove it to an auditor.
If you're donating in kind, like donating a car with a value of $5,000, the IRS requires an appraisal on the car to back-up your claim.
Unusually High Expenses Unusually high expenses like steep medical bills can make you a candidate for IRS auditing.
If you have such a high medical bill, it's always a good idea to send some documentation along with your return.
Filing a Sloppy Tax Return Filing an incomplete return or a return that is hard to read will invite extra attention from the IRS.
Preparing tax returns on a computer with a tax preparation software eliminates errors in tax filing, and wards off any unwanted attention.
Don't forget to sign your tax returns.
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