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February 21, 2008 ( PowerHomeBiz ) -
New York NY ---
No one should be afraid to take a deduction if it is real and you have the records to support it. How do you avoid an audit? Be honest, keep good records, and try in good faith to follow the rules. You may still be audited, and even owe a bit more, but odds are you won’t be left imprisoned or impoverished.
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7 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 scope of 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.
- Bring only what you're asked for. Additional records and items not
requested in the original audit notice should be left at home. That way,
if the auditor is curious about something else on the tax return, but
the item was not on the original audit notice, you can politely tell him
or her that those records are at home.
- Stay on point. The auditor will be able to obtain some very valuable
information during what seems to be simple and friendly discussions.
When you meet with the auditor, in essence, you're providing testimony.
So answer as many questions as possible with a simple "yes" or "no"
response. If you must expand or explain, keep it brief and very much to
the point. Don't give the auditor a reason to expand the audit just
because you tend to ramble on.
- 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!!
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 claim generous travel and
entertainment deductions, it will catch someone’s attention
- Substantial business meal and entertainment deductions
- Excessively high income compared to previous years
- Large deductions relative to income
- Excessive home office deductions
- Losses from a hobby rather than a business venture
- Low income, but significant business deductions
- Non-cash charitable deductions
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.
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 2008 and the Supplement at
www.jklasser.com.
For further information about our new subscriber-based web service
JKLasser.com, to request a review copy of J.K. Lasser’s Your Income Tax
2008, or to schedule an interview with J.K. Lasser spokesperson,
Contributing Editor Barbara Weltman, Esq., please contact:
Contact Information
Nancy Colson
Managing Director
The Alternative: Media Placement Specialists
212-246-1580/ ncolson@nyc.rr.com
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