Audit red flags when filing taxes

Are you doing your taxes? Kiplinger’s Personal Finance magazine has put together a list of 14 audit red flags. Here’s what’s included among them:

  • You make too much money. The IRS will target those with incomes above $200,000. You have a 1 in 30 chance of being audited.
  • Not reporting taxable income. You must report all 1099s and W-2s, even if you believe them to be incorrect. (Deal with the discrepancies after filing.)
  • You give a lot of money to charity. The IRS knows what others who make similar income to you tend to give and will question you if you’re claiming too much.
  • Claiming day-trading losses on Schedule C.
  • Claiming rental losses.
  • Deducting business meals, travel and entertainment.
  • Claiming 100% business use of a vehicle. Be careful, salespeople! To counter any possible IRS questions, I know someone who keeps a paper log on the dashboard and writes down every mile for work, the date and what it was for. If you do want to claim all the cost for a business expense, be sure you have another vehicle too.
  • Writing off a loss for a hobby.
  • Claiming a home office deduction.
  • Taking an alimony deduction.
  • Running a business where almost all money is in cash.
  • Not reporting a foreign bank account.
  • Engaging in currency transactions.
  • Taking excessive deductions. Again, the IRS knows what is outside normal bounds based on your income.

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