Is no fun when IRS singles you out among the few individuals whose accounts get special interest. Certain behaviors trigger IRS audit, but you don’t need to fear, you can survive it if you have proper documents to back up your claims about your total financial situations.
You need to avoid the following ten IRS audit flags if you want to stay clear of audit eagle eye.
Ten IRS Audit Flags to check out:
Here is the list of top 10 IRS Audit Flags you can check out with:
History with IRS
The truth is if you have been audited before, you are likely to be audited soon. Therefore, you must be careful when preparing your tax returns; the idea is to stay out of trouble by creating less attention for yourself.
Everybody likes to make a lot of money, but every success has its challenges, you are likely to get IRS attention, so make sure you do proper IRS tax filing to avoid too much scrutiny.
Avoid reporting losses on hobbies
Remember the tax law that makes it clear that you can’t claim losses from anything considered a hobby. However, you can only claim a loss on a hobby if you can prove that you have been using it as a business.
Giving too much to charity
Is good to involve in charity services, but make sure whatever you are giving to charity is properly appraised. Giving too much to charity can raise IRS attention especially if it’s more than what is expected for that income level.
Not reporting all Income taxable
If you don’t report all your income, the probability is very high that IRS will find out and ask you to pay. Avoid this unfriendly situation because it can lead to a jail term.
High deductions for meals and travels
If you are running a private business, you likely may need to travel or host your clients to meals and entertain them as well, those are deductibles but if the amount claimed is too much for the business, there IRS will raise a red flag.
Disclose alimony deductions
The fact is alimony is taxable income and if received by check or cash is deductible if certain conditions are met. To find out if you can claim a deduction from IRS office close by.
Claiming your car was used all the time for business
If you claim your car was used 100% of the time for the business will raise big IRS red flag on the authenticity of your claims. Consult a CPA firm before filing your taxes in order to know how many claims should be safe.
Home office claim for your business
If your schedule C show loss on the business and you are still claiming home office deductions, you are definitely risking IRS audit big time.
Taking early withdrawal from 401k
If you make a withdrawal from an IRA account or 401k account before you get to fifty-nine and half years of age, without meeting the exemption conditions you likely to pay ten percent penalty.
[quote align=”center” color=”#999999″]There is no need to panic because the number of people selected for audit on yearly basis is less than 1%, but it’s better not to fall into this category.[/quote]