Tax Deductions that Alert an Auditor
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by: dmishesq
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Taxpayers instinctively want to claim for every possible tax deduction that they can qualify for. This is largely because of their desire to rid themselves of the IRS or save as much money on taxes. In many cases, however, tax deductions are abused or their guidelines leave a number of grey areas. Although these deductions are provided to taxpayers for some valid reasons, outrageous amounts will surely alert any IRS agent that something is wrong, and as a result, audit will be needed. Everyone is aware that IRS problems come after an audit.
One of the most misunderstood deductions is the home office. A number of people believe that if they simply have a home office, where they work and do business, then they'll be able to deduct the value of their entire home. There are criteria and specific regulations on when you would be able to deduct such a generally large sum of money. Understand that IRS auditors have often seen many inconsistencies and errors on tax returns. In fact, there is a system that will assist them in making a decision to conduct an audit and in examining the accuracy of the entries on tax returns. If you have simply deducted the full value of your house because you have a home office, then you are up for some IRS issues.
Business owners often make mistakes on deductions concerning business advertisements on their respective cars. They assume that they can automatically deduct all their auto expenses from their taxes. Unfortunately, this tax deduction doesn't work in that manner. Normally, they can only claim for deductions related to the cost of the paint or the other advertising paraphernalia used on the vehicle. They will also be able to take a small deduction on the vehicle's auto expenses, however, this is dependent on the car's business use. That is calculated by dividing the business mileage you tracked (it's a good idea to have an actual mileage log so that you can show auditors your excellent record-keeping abilities in case of an audit) by the total mileage. Hypothetically, if you drove your vehicle 10,000 miles in the course of a year, and had 2,000 of those miles counted towards business, then you would be able to deduct 20% of your auto expenses. This example illustrates that there is indeed a need to keep accurate mileage records so you have something to show the IRS when they conduct an audit on your tax returns.
Strange as it may sound, many people claim for deductions on body part donations, especially if these are done for the advancement of science. However, only if 100% of your ownership rights or interest is given to non-profit organizations will the IRS consider this deduction a valid claim. The IRS doesn't honor this claim simply because this entails a donation of only a 'part' of your body. Hence, anyone who attempts to do this will certainly encounter IRS problems.
About the Author
Darrin T. Mish (http://www.getirshelp.com) is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. His passion is providing IRS help to taxpayers with both individual and payroll tax problems. He teaches attorneys, CPAs and Enrolled Agents in the finer aspects of IRS representation all around the United States. He can be reached at his website at http://www.getIRShelp.com
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