Robert J. Fedor, Esq., L.L.C.

Red flags in taxes may lead to audits from the IRS

People have their own way of filing their taxes. Some file as soon as they have all of their information, while others wait until the last possible day to get their taxes in. Along these same lines, some go to a tax preparer, while others electronically file on their own at home. Either way though, whether someone filed as soon as possible, or spent April 15 running around their home looking for that one last 1099 form, experts estimate that individual filers have roughly a one in 100 chance of ending up being audited. 

At this point, with it being April 21 already, for many, tax time is done. They have filed and considered themselves done with the tax process for the year. However, with the one in 100 experts' estimate to CNN, some may find themselves being contacted by the IRS. Even just hearing the word audit is enough to make almost anyone panic, even if nothing was intentionally done wrong. 

A recent WCPO Cincinnati news report focused on some of the top red flags for the IRS. 

One of the big ones, according to the news report, is forgetting to report information from a 1099 form. This is a red flag as this form reports various types of income, typically income from outside the salary paid by an employer. An example of this type of mistake would be if someone reported their salary from their employer, but forgot to include information regarding interests and dividends from a 1099 form.

However, forgetting to report information is not the only red flag, as reporting a high amount of charitable contributions can also be a sign of something not being right. In general, the IRS has a calculated donation range for different income amounts. If something falls outside of the norm, the filer could see themselves facing an audit. 

Lastly, when it comes to deductions, it is best to err on the side of caution. For example, just because someone works from home twice a week and purchased a desk for their home office, this does not mean this desk could be used as a write-off. Rather, there are very specific rules governing what a home office is and what can be written off. It is best to fully understand these rules before attempting to claim a home office write-off.

Of course at this point, this information may come a little too late for some. In the cases where there is an audit, know the findings do not need to be the final answer. Rather, reach out to a tax law attorney to see what options there are after an audit. 

Source: WCPO Cincinnati, "Easy tax mistakes that could get you audited," John Matarese and Maxim Alter, April 14, 2014

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