Deductions That Raise Red Flags With The IRS

1. Higher Income Tax returns probably those above 100 grand are more likely to get audited because there is more tax money at stake. It's not really fair that you're under higher scrutiny for making more money, but that's the way it is.

2. If your income this year has gone considerably higher from previous year it may trigger a red flag at IRS and the chances of getting audited becomes more.

3. Claiming $6000 on business meals when the average for your tax bracket is around $1,600.

4. IRS pays more attention to the filers who claim home business in addition to their regular salary income or if you claim excessively high deduction. Remember, the room has to be exclusively used for business office purpose. You cannot put a desk in the corner of your home and claim it as a home office. The best way to avoid this is to measure the portion of the home you are using for business and calculate the percentage with respect to the total area of your home. Suppose if you get 20%, then you can only deduct 20% of your mortgage in your tax returns. Another important point to keep in mind is that if you incur losses year after year in a home business which is your hobby but not sole propriety and when you report them on Schedule C, you are once again prone to get audited, so stay as far as away from Schedule C, as the Schedule C Filers are among the most likely people to get audited.

5. Income like investment returns etc. if it is not reported can trigger off an audit. Also income other wages not reported will most likely increase the chances of getting audited.

6. Non-cash charitable tax donations are under the scanner now, the IRS now needs the receipt of the transaction or the bank statement showing the transaction of the donated non-cash item. If you fail to do that, it can again be an audit alarm for you.

7. Watch out when you are claiming casualty losses, claiming large casualty losses could result in an audit. And the important point that should be noted is that the casualty losses should only be due to uncertain and sudden causes like fire, theft, and tornado or hurricane damage. Losses occurring due to slow wearing down of conditions do not qualifyDeductions That Raise Red Flags With The IRS.
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