| In these times of a struggling economy, massive | | | | conservative, be well documented, and be ready to |
| Government spending, and a skyrocketing national | | | | answer questions. |
| deficit, you can be sure that the IRS will work hard to | | | | Charitable Donations |
| collect every penny they're owed. The IRS estimates | | | | The rules of thumb used to say that you could deduct |
| that the gap between what is owed by taxpayers, | | | | $500 for charity without any documentation, and not |
| and what the IRS collects each year, is in the | | | | worry. This no longer holds true. The IRS requires that |
| neighborhood of $400 billion. This could lead to higher | | | | all charitable donations be accompanied by written |
| scrutiny of individual tax returns, and an increasing | | | | verification from either the charity, or your bank. If you |
| number of IRS audits. | | | | donate more than 10% of your income, you should be |
| The IRS keeps their criteria for auditing returns a | | | | commended for your generosity, but you should also |
| closely guarded secret, but there are a few things that | | | | be ready to prove it to an auditor. |
| clearly increase your odds of having to explain | | | | Another important note for charitable contributions is |
| yourself to the taxman. | | | | that if you're making a non-cash donation of property |
| Having a High Level of Income | | | | (such as a car) and the value is over $5,000, you're |
| It's a problem most Americans would love to have, but | | | | required to have an appraisal done on the property to |
| earning a 6-figure salary increases your odds of | | | | back-up your claim. |
| catching unwanted attention from the auditors. There | | | | Unusually High Expenses |
| seems to be two reasons for this. First of all, the more | | | | Steep expenses are another factor that will send a |
| you earn, the more valuable your tax reporting error is | | | | return under the magnifying glass of an auditor. If |
| to the Government. After all, and error of a few | | | | anything seems excessive, the IRS will take a closer |
| hundred dollars is much less interesting than and error | | | | look. If you have unusual expenses, such as very high |
| of tens of thousands of dollars. Secondly, higher | | | | medical bills, it's always a good idea to send an |
| income earners tend to own businesses, rental | | | | explanation along with your return. |
| properties, investment portfolios, and other items that | | | | Filing a Sloppy Return |
| create a more complicated tax return. The more | | | | A carelessly filed return that is either incomplete or |
| complicated the return, the bigger chance of a mistake. | | | | hard to read will invite extra attention. An organized |
| While having a high level of income sends up a red | | | | return prepared with a computer eliminates the |
| flag, most folks will gladly take their chances with this | | | | possibility that a number is illegible, and tax preparation |
| one. | | | | software reminds you to fill in each box and checks |
| Home Office Deductions | | | | for errors. The IRS feels that messy returns are more |
| If you own a home-based business as either your | | | | likely to contain errors. Even a simple oversight means |
| primary source of income, or a supplement to your | | | | that an auditor has to examine the return in order to |
| regular salary, tread carefully when taking home office | | | | correct the mistake. Don't overlook the details. Be neat, |
| deductions. You're well within your rights to take | | | | and be precise. Also, make sure you sign your return. If |
| self-employment deductions, but make sure every | | | | you fail to sign it, the IRS will take a closer look. |
| deduction you claim is both legitimate and documented, | | | | As long as you report all your income, have proper |
| because this will increase your odds of being audited. | | | | documentation to prove your deductions, fill out your |
| Resist any temptation to squeeze in a few personal | | | | forms correctly, and calculate your taxes correctly; |
| expenses, and if you write off a percentage of your | | | | you don't need to fear an audit. However, it's still a |
| home expenses as business square footage, be | | | | good idea to avoid sending any red flags to the IRS. |