Miami Accountants 6 IRS Audit Flags
Miami Accountants warn there are six deductions which are potential audit flags. They range from business use of your car to simple math errors.
1. Business Use of Your Car
Miami Accountants urge you not to guess how much you drove your car for work. You can base your deduction on your actual expenses or use the IRS’s standard mileage rate of $.55 a mile — but either way, the IRS could ask you for records of your business mileage and your Miami Accountants and you will have to produce the purpose of every trip claimed. GPS devices and precise calendar entries can be very effective in bolstering your claim.
2. Home Office Deductions
Miami Accountants Gustavo Viera CPA says you can claim a home office deduction for a percentage of your mortgage, utilities, phone bills, insurance, and maintenance allocated to space used “exclusively and regularly” as a principal place of business. A lawyer who occasionally writes briefs in a study that is also used as the family’s TV room will have trouble claiming the space as an office. However, this is a high audit item.
3. High Itemized Deductions for Your Income
Miami Accountants will tell you don’t try to claim $25,000 in charitable contributions if your income is $125,000. “The IRS has a range in which they consider certain deductions reasonable,” Gustavo Viera, Miami Accountants. “If your return doesn’t fit the IRS’s profile, the computer kicks it out, and a human being looks at it.” The average charitable contribution is $3,790 for people with adjusted gross incomes of $100,000 to $200,000 who claimed charitable donations, according to Miami Accountants.
4. Non-Cash Charitable Contributions
These could be clothes, household goods, artwork, a car, or any kind of property. The IRS requires you to file Form 8283 for donations over $500. “That form alone is a red flag,” says Miami Accountants VieraCPA. The key is having all the supporting documents. Make sure you have an itemized receipt for contributions to Goodwill, Salvation Army or a church clothing drive. If you’re given a blank form to list your donations, make sure you fill it out and have the charity sign and date it.
5. Investment Income Discrepancies
Your bank, broker, and mutual funds send the IRS statements listing every penny they paid you. But financial institutions make mistakes. For example, if you make your 2009 IRA contribution between January 1 and April 15, 2010, your broker might inadvertently report the tax year as 2010. “All he has to do is check the wrong box,” says Miami Accountants VieraCPA. “When you make the contribution, be sure to get a receipt from the brokerage stating the tax year.”
6. Math Errors
This is a gimme for the taxman, so check your numbers. Then check them again. It doesn’t matter if you underpay your taxes because you added the numbers wrong, any underpayment will be due — with interest, currently 4 percent compounded daily. You will even owe a penalty of one-half percent of the tax owed for each month the tax remains unpaid, up to 25 percent, although the IRS might waive it. The IRS has three years to find the error and notify you, and all the while interest and penalty accumulate. Every day.