How To Avoid The IRS Audit
Carl
Hampton 02/17/2010
‘Tis the season, Tax season that is, and
unlike Christmas it isn’t everyone’s favorite
time of year. Right now is the time of year of
stress and headaches, sorting through all of
the finances of the past year in search of
accuracy as to not be audited and also in
search of anything that can be termed a
deduction to get a little bit of that
government money back.
One major thing that you
need to keep in mind when sorting through the
chaos it to know your facts before you file a
deduction, there are quite a few things that
are routinely claimed as a deduction that
don’t qualify. Deduction mistakes like these
can come back to haunt you down the road in
the form of an audit or penalty.
Mistakes like these may
be common, so make sure you aren’t a
statistic. Most divorcees know that alimony
is permitted to be deducted, but contrary to
popular belief, alimony is the only form of
income paid that can be deducted. Meaning
that deducting spousal and child support does
not qualify.
Let’s take a minute while
talking about the family to discuss whom
exactly qualifies as a dependent.
Many separated or
divorced couples race to claim the kids, but
the IRS has a clear (but complex) set of rules
that determine who gets to claim which child.
So that homework needs to be done, however if
both parents try to claim the same dependent
in the same year, whoever files second will
probably be rejected, putting everyone into a
category where you may have to furnish proof
that establishes who is eligible to claim.
While on the topic of the
home front I have to mention homeowners
insurance. This is a bit of a grey area for
some because it can be used as a deduction for
those individuals that use part of their home
for business or for those who own rental
properties. Also, when dealing with
insurance, life insurance premiums are
non-deductible for individuals, but group life
insurance premiums are allowed to be deducted
by employers with certain specific
limitations.
Now to speak a bit on
deductions that effect your professional life,
unreimbursed work expenses qualify as a
favorite for people to claim but there are a
couple of things to keep in mind.
Self-Employed taxpayers can deduct every penny
of expenses that occurred on the job, but w-2
employees can only deduct unreimbursed
expenses in excess of 2 percent of the
adjusted gross incomes, and this is only
available to those who are able to
specifically itemize their deductions. So make
sure you fit the guidelines and if you claim
something make sure you have the documentation
to back things up.
When it comes to
contributions and donations, do your research
before you donate if you plan on deducting
those funds. Take political contributions for
example, cash or property donations to any
501(c)(3) organization are available for
deductions, but in contrast, political parties
do not fall into this category. Also, when you
make a donation to a charity, keep in mind
that dollar limits for this type of
contribution are lower than for cash. Cash
donations of up to 50% of adjusted gross
income are deductible, but property donations
have a limit of 20% or 30% adjust gross
income. Make sure that your property donations
do not exceed these income limits in the year
that you give it to charity.
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