AVOID THESE 5 MOST COMMON TAX AUDIT RED FLAGS


Tax audit

Claiming bizarre deductions

Air conditioning for an excessive sweating disorder, a nose job for a wine taster — bizarre deductions like these are likely to spark suspicion from the IRS. But don’t let that stop you from claiming them if they are legitimate. Both the nose job and the air conditioning unit were allowed, for example.

But others, like used underwear donated to charity or medical bills for pets, were not. So don’t stretch the limit too far, and when in doubt, ask a tax professional before turning yourself into a target for the IRS.

You claim the same child as someone else does

If your ex files their taxes before you and claims your child as a dependent, the IRS is going to be very suspicious when your return comes in claiming that same child as your dependent.

This often happens when a couple gets divorced and one parent has primary custody, but the other still tries to claim the child as their dependent. Or when a grandparent is the sole caregiver, but the parent still claims the child as their own.

Even if you’re in the right, the IRS may force you to provide extensive proof that the child you are claiming does indeed qualify as your dependent.

An inconsistent social media profile

Yes, you read that correctly. If auditors are suspicious of unusually high deductions, they will seek out any available information to corroborate your tax claims; sometimes, this involves looking at your social media activity. So if you are planning to deduct business trip expenses on your taxes, be careful about tweeting photos that make it look like a party vacation rather than a professional excursion.

When you claim the Earned income Tax Credit

Fraudsters love the Earned Income Tax Credit, a refundable credit of as much as $6,000 depending on your income and how many children you have (the more children, the bigger the credit). That’s why the IRS tries to make sure that this credit is only doled out to people who deserve it.

To find out if you qualify for the EITC, there’s a tool on the IRS website that you could use. And if you claim the credit, make sure you have documentation including the Social Security numbers for all of your children and proof that they live with you — like letters from their schools or doctors that were sent to your address

Excessive home office deductions.

Although the IRS has slightly loosened its grip on home office deductions, they are still widely considered a red flag if you are claiming a hefty deduction in comparison to your business income. Be especially wary if you are claiming:

Both a home office and a rented office space

More than 50% of your home

A lot of expenses for home maintenance and utilities

The best way to ensure you don’t have any issues this tax season, hire Occena Law, we have trained professional ready to help. Call us today! (781) 629-5147