RED FLAGS

Curious on just how far you can take it? Listed below are some of the more common red flags that may bring attention to your tax return:

  • Failing to sign your return
  • Failing to attached W-2 copies to your return
  • Claiming dependents already reported on someone else’s tax return
  • Math errors
  • Disagreements between amounts reported for federal and state returns
  • Unreported income
  • Suspiciously low income
  • Suspiciously high deductions
  • Significant changes in income or deductions from prior year tax returns
  • Claiming losses on self-employment income
  • Unusually high self-employment expenses
  • Large deductions for meals, travel and entertainment
  • Reporting home office deductions
  • Unsupported charitable contributions
  • Reporting unusually high employee business expenses
  • Unusually high automobile deductions
  • Claiming 100% use of business vehicle
  • Claiming rental real estate losses
  • Claiming the adoption tax credit
  • Claiming the home buyer credit
  • Failing to report a foreign bank account
Every year many taxpayers push more and more to see just how far they can push the envelope. In other words, the thought process is “if I got away with that last year, perhaps I can do it again and maybe just a little bit more?”What you got away with last year, unfortunately does not translate into what you can get away with this year. IRS examination techniques are becoming more and more sophisticated every year. Information on matching how much income you receive may now be available to the IRS; whereas last year this information was not reported. Most returns are processed through computer systems that now perform various analyses that were never previously done. The amounts you report will be compared to other information reported, may be compared to prior year information you reported and may even be compared to other individuals you work with.Now, I’m not saying you shouldn’t take a deduction or credit you’re not able to.  You should.  In fact, you should explore every opportunity to reduce your income tax bill or increase your tax refund. When dealing with your taxes remain cautious on the deductions you can and cannot take. When taking a deduction, be sure you’ve gathered and retained all the necessary information to support your deduction, or don’t take it.