Save Money / Consumer News
IRS audit: Tax tips to avoid receiving that letter
LOS ANGELES (KABC) -- If you earn less than $200,000 a year, your likelihood of being audited is about 1 in 100. But those odds go up significantly for certain types of taxpayers.
Receiving an audit letter from the IRS can be a frightening experience. Some may get that letter because certain deductions can trigger an audit even if they've done nothing wrong.
"The first thing that goes through their mind is absolute panic that they're being audited," accountant Alan Rosen said. "What did they do wrong? They can't believe it. There goes everything they've worked for, saved for all these years."
Tobie Stanger, a senior editor at Consumer Reports Money Adviser, says some taxpayers are more likely to be audited than others.
"Taxpayers who have their own business and itemize deductions for home office, telephone, business meals, they need to be extra careful," Stanger said.
Business expenses that could be personal, like meals or travel, are one of the first things the IRS goes after. Keep a careful calendar of your business meetings and hold on to the actual receipts and not just your credit card bills. Also, if you claim a deduction for a home office, be sure it looks like an office. It's best if it does not double as a laundry or playroom.
Stanger says another red flag that can attract the attention of the IRS is excessive charitable donations. If you're donating 50 percent of your income, that can seem out of place, she said.
For charitable donations, make sure to get dated receipts. They are required for cash contributions over $250 and for gifts of goods like clothes or furniture.
"You should keep your tax records for as long as the IRS can audit you, which is three years," Stanger said. "But just to play it safe, we recommend holding them for seven."
Lastly, check the math. Believe it or not, simple mathematical errors trigger the most notices from the IRS.
taxes, save money / consumer news, ric romero
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