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Red Flags
In general, red flags are assigned to any aspect of your tax forms that
seems inconsistent with other reported figures. So, if you donated 75% of
your net income to charity or work from home, but have generous travel
deductions, it will catch someone’s attention.
Discrepancies between different tax forms are big red flags. For,
instance if you’re a freelance writer or accrued interest on a bank account,
you should receive a Form 1099 information return documenting how much you
earned. You are assured some contact with the IRS if the tax return doesn’t
accurately reflect the information returns on file with the IRS.
Additional red flags include:
Substantial business meal and entertainment deductions Excessively high
incomes compared to the previous years Large deduction relative to income
Excessive home office deductions Losses form a hobby rather than a business
venture Low incomes, but significant business deductions Non-cash charitable
deductions Several dependents
Audit Tips
If there is a golden rule for audit, it is to not offer more
information--spoken or written--then is absolutely necessary. Don’t give the
auditor any reason to expand the audit.
- Don’t ignore the notice!
- Organize your records.
- Making the auditor’s job
easier may help the process go more quickly and will help create the
impression that you are an organized person.
- Replace missing records. If you
can’t obtain a duplicate copy of a missing record look for other ways to
support your deduction. Diaries, logs, and other contemporaneous records may
help support your claim
- Provide only copies. If you bring original records,
do not give them to the agent. Allow the agent to make copies but make sure
you retain the originals. You must be careful because the IRS isn’t
responsible for lost documents.
- Know your rights as a taxpayer!!
For more on
what can work for you, against you, and how to do better this year, see J.K.Lasser’s Your Income Tax 2007 and the Supplement at
www.jklasser.com .
For further information, to request a review copy of J.K. Lasser’s Your
Income Tax 2007 or to schedule an interview with J.K. Lasser spokesperson,
tax attorney Donna LeValley, please contact:
Nancy Colson
Managing Director
The Alternative: Media Placement Specialists
212-246-1580/ ncolson@nyc.rr.com
