On 1/8/2008 Carl Root wrote: >I have been audited. They don't tell you why, but I know that wasn't >the reason. Trust me on this. >> One "red flag" that is cited over and over again is claiming a >> "home office" deduction (which I have never done). >I have from day one. I cleaned up my office and shop in preparation >for the audit, but she didn't even want to look at them.. "Of course >you have an office and a shop", she said. Unfortunately, I can't get away with it. My house is too small to devote any room exclusively to office or shop. > Another is claiming more deductions than is reasonable based on > your total income. >I'm not sure there's a connection between "reasonable" and income. >For example, if you put an obscene amount of miles on your car but >aren't particularly efficient in your scheduling, should they >penalize you? No - but it might make them want to take a look at your documentation. If you drive a total of 15,000 miles in a year and 14,375 of them are business miles and you don't have a second car - they may just want to take a look at your records and make you prove that that's what happened... An audit is not a penalty. It could either be routine - a number of returns are selected at random every year. Or it could be set off by a "red flag" - something is unusual about the return. It could be perfectly legitimate - as per your example above - but they want to make sure that it is. But your example is not really what I had in mind. If your total income is 60,000 and you claim $25,000 in cash charitable contributions - you can bet your life that this will set off a red flag and they will want to see your documentation. >It's all about documentation. It's also much less about proving >expenses, and more about accounting for every dollar you've deposited >into your bank account. That's once you get audited. But tax professionals will tell you over and over again - there are "red flags" that will make an audit more likely. And two of the most often cited red flags are the examples I gave. If you wish, I can post the entire list of this year's "red flags" from Turbo Tax... Israel Stein
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