Tax Debt Advisors, Inc.–information on IRS Audit Red Flags
Here is some information about IRS audit red flags for Chandler Arizona residents. Some can be avoided and others cannot. However, if you are entitled to a deduction, take it. Don’t avoid a deduction because it might trigger an audit. Here are the top ten reasons taxpayers get audited:
- Income is too high—not much you can do here but it is facts that the higher your income the higher the chances you will be selected for an audit even if you don’t have other audit red flags.
- Omitting income that has been reported to the IRS—the IRS computers match up income reported to them, to income reported on your return. If you have omitted a 1099 or W-2, the IRS will send you a notice.
- Large charitable donations of property—remember to file form 8283 for donations over $500 and have an appraisal.
- Home Office deduction—everyone wants to deduct what amounts to personal living expenses against business income. Remember that the area of your home that you want to write-off expenses must be used exclusively and regularly as your principal place of business. A corner of your bedroom or kitchen is not acceptable.
- Rental losses—active participation allows you to write-off up to $25,000 of loss subject to phase out rules. Real estate professionals who spend more than 50% of their time and 750 hours each year can deduct losses with no limitations.
- Excessive business meals and travel and entertainment expenses—it just seems to be too tempting for self-employed individuals to try to take advantage of these deductions and the IRS knows that.
- Writing-off 100% of business use of vehicle—just reporting a more realistic % can avoid a tax audit in this area.
- Businesses that lose money—there must be a profitable business motive. If you are trying to deduct each year losses from what amounts to a “hobby,” expect an IRS audit.
- Higher than average deductions—deductions that are higher than average compared to income reported is a huge red flag.
Scott Allen E.A. of Tax Debt Advisors, Inc. offers a free consultation for Chandler AZ taxpayers and all surrounding cities, and can be reached at 480-926-9300. Tax Debt Advisors, Inc. has been representing taxpayers since 1977.
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