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Red Flags The IRS Does Not Want You To Know
We all want peace of mind.
We all want to stay away from red flags that the IRS does not want us to know and we all have a desire to do what is right to stay out of unnecessary trouble.
The deadline for filing taxes is quickly approaching and you are busy gathering all of the required information.
You are either going to submit your tax return with your own tax software or you will leave that responsibility for your tax preparer.
We all try to be as honest as possible, as is required by law, in supplying the required information to the IRS but the fear of a tax audit is always hanging in our minds.
The chances of being audited by the IRS are slim but that does not stop us from having a ping of panic when we receive unexpected mail from these these three letters, “IRS”.
To avoid any panic attacks in the first place, look out for the most common audit triggers on your return so that you can breathe easily the nest time you file your taxes:
Large deductions on a small budget:
The IRS compares your write-offs to those of people with similar filing status and income.
If your numbers are too big, your tax return will stick out from the rest.
Make sure to keep good records and store them in a safe place. The IRS will not settle for guesses about charitable donations or business travel expenses if you get audited.
Bogus business Claims:
The IRS has a field day with Schedule C, the form self-employed people use to write off their business losses and exemptions.
Pay special attention to the following audit triggers:
You may love collecting and refurbishing antique paintings but you cannot write off losses unless you are trying to earn a profit from your pastime.
Home office deductions:
You must be able to prove that you regularly use this space for business and strictly for business.
Mileage deductions are common audit triggers. It’s advisable to keep a mileage log so that you do not overestimate the distance you travel. Note the reason for each trip.
Early payouts from retirement accounts:
This is the most common mistake people make when withdrawing from their retirement accounts early, before age 59 1/2, claiming an exception to the 10 percent penalty when they do not qualify.
Pay close attention to the exceptions listed by the IRS. If you need to make an early withdrawal, expect the IRS to take a close look at your return.
Wrong wages and other typos:
Small mistakes can be a big thing.The IRS has all of your forms. That will mean trouble if the numbers on your form are incorrect.
It’s easy to make make mistakes when you file with pen and paper, which is mostly a thing of the past.
Avoid costly mistakes by filing electronically.
Make sure you input the correct data.
Most online and computer tax programs will automatically check your math for you.
Rounded numbers on write-offs:
Using too many zeros may prompt the IRS to think that you are guessing or pulling deductions out of thin air.
If you are writing off a donation, go ahead and list it as the actual $267 and not $300.
It’s important to keep receipts just in case you get audited.
Most of the refund that you might get came right out of your paycheck and headed directly to Uncle Sam.
If you allow the government to withdraw too much in taxes, you are allowing the government to earn interest on that money, instead of you.
How fair is that?
Imagine how you could have used that money?
So stop giving the government an interest free loan.
Request a new W-4 form from your employer and claim more allowances on it.
You tax refund may come out closer to zero but your paycheck will get bigger.
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