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Tax Audit Triggers

Tax audit triggers are on everyone’s mind. Many people are afraid to take deductions because they don’t want to get audited. A tax attorney can help alleviate your concerns with proper tax planning and preparation. Hiring a tax attorney doesn’t mean you won’t be audited. But, it does mean that you will be prepared to prove every deduction. There is nothing inherently sinister about an audit. A tax audit is just the IRS double checking your numbers. If you don’t keep proper tax records then a tax audit may be a very painful experience. The IRS loves discrepancies because they lead to questions which probably lead to more taxes owed. If you tell the truth on your tax returns then there usually shouldn’t be a problem. You can stop worrying about tax audit triggers.

But, if you are like most people you want to pay the least amount of taxes. There is nothing wrong with that. But, it does mean that you should have an experienced tax professional guide you. Why? Because the IRS often selects taxpayers for audit based on suspicious activity. Keep these tips in mind when preparing your taxes:

Making errors

Don’t make mistakes. You’ll be hit with fines regardless of whether your mistake was intentional. Remember that even automated programs can make mistakes. If you make a mistake putting in the data then guess what you’ll get the wrong answer.

Failing to include a 1099 or additional income

Always include every source of income. You may be tempted to only submit the W-2. Don’t. Every 1099 you receive needs to be reported. Why? Because your employers have already told the IRS the amount they paid you. It’s only a matter of time before they discover your omission.

Reporting too many losses on a Schedule C

If you are self-employed, you might be tempted to hide income by filing personal expenses as business losses. The IRS may begin wonder how or why you are still in business.

Claiming too many business expenses

To be eligible for a deduction, purchases must be 1) ordinary and 2) necessary to your line of work. Making too many business claims will definitely raise a red flag. As long your expenses are justified, you’re all right. But if you’re making claims you shouldn’t, watch out.

Claiming a home office deduction

The IRS narrowly defines the home office deduction as reserved for people who use part of their home “exclusively and regularly for your trade or business.” That means a home office can qualify if you use it for work and work only. Only claim a home office deduction if you have a section of your home that is strictly used for business purposes.