Tax Deductions that are Immediate Red Flags for an Auditor

It is natural for taxpayers to try to claim as many deductions on their yearly tax returns. It is clear that they do not want the IRS any more than they actually have to, and that they want to pay less as much as possible. However, there are some legal deductions that have either been abused too much or are simply too easy to abuse that whenever anyone claims any of these selected deductions, the IRS begins to take notice. Sure there are always accurate and well-founded reasons for using any of the deductions, but depending on the amount of the attempted deduction, it'll be very clear to any IRS agent that something is not right, and audit will be needed. Obviously, having an audit can lead to other IRS issues.

Among the most abused deductions are those related to people's claims of having a home office. If people work and do business at home, they assume that they can already deduct the total value of the property from their taxes. They simply forgot about the criteria that need to be met before anyone will qualify for this deduction. Remember that the IRS auditors are trained in checking the accuracy of tax returns and they even have a system that will assist them in doing this. When you deduct the full amount of the house from your tax return, auditors will question you. You must then be prepared as an audit is underway, and perhaps, an IRS problem.

Another usual mistake for business owners is thinking that they can deduct their entire auto expenses when they put company advertisements on their vehicles. Sadly, they can only claim for deductions that are related to the cost of the paint and advertising paraphernalia. They may also claim a percentage of their vehicle's auto expenses though. This percentage is equivalent to the car's mileage for business divided by its total mileage. For example, if you have a total yearly mileage of 10,000 and 2,000 of this is utilized for business, then you can claim for 20% of your total auto expenses as deduction. This scenario then magnifies the necessity to keep accurate logs of your mileage so you will not have IRS problems when claiming deductions related to your auto expenses.

Deductions related to body parts and pets also routinely appear on people's tax returns. Surprisingly, people do attempt to claim for deductions of body parts donated to science. Sadly though, if these donations are for non-profit organizations and not 100% of your ownership rights and interests are given up, these are not valid claims for deductions. And since this undertaking only involves a body part, this doesn't qualify for the 100% giving up of your ownership rights. Anyone who attempts to deduct either body parts or their pets on their tax returns should also prepare to handle some IRS problems.

 Darrin T. Mish is a Nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. His passion is providing IRS help to taxpayers with both individual and payroll tax problems. He teaches attorneys, CPAs and Enrolled Agents in the finer aspects of IRS representation all around the United States. He can be reached at his website at http://www.getIRShelp.com

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