[CAUT] Taxes (was "PTG dues"

[Carl Root]

A posted list of "red flags" would be interesting, actually, if you  
have the time.

This raises the question of whether on not you should take a  
legitimate deduction, knowing that it could flag your return.   
Sometimes it makes sense to hold it, then bring it out if you're  
audited to make sure that they're the ones who owe you money.  Trying  
to nickel and dime uncle sam every year, an attitude that is all too  
common, never made much sense to me, for a variety of reasons.

Carl


On Jan 8, 2008, at 7:18 PM, Israel Stein wrote:

> On 1/8/2008 Carl Root wrote:
>
>> I have been audited.  They don't tell you why, but I know that wasn't
>> the reason.  Trust me on this.
>
>>> One "red flag" that is cited over and over again is claiming a
>>> "home office" deduction (which I have never done).
>
>> I have from day one.  I cleaned up my office and shop in preparation
>> for the audit, but she didn't even want to look at them.. "Of course
>> you have an office and a shop", she said.
>
> Unfortunately, I can't get away with it. My house is too small to  
> devote any room exclusively to office or shop.
>
>> Another is claiming more deductions than is reasonable based on
>> your total income.
>
>> I'm not sure there's a connection between "reasonable"  and income.
>> For example, if you put an obscene amount of miles on your car but
>> aren't particularly efficient in your scheduling, should they
>> penalize you?
>
> No - but it might make them want to take a look at your  
> documentation. If you drive a total of 15,000 miles in a year and  
> 14,375 of them are business miles and you don't have a second car -  
> they may just want to take a look at your records and make you  
> prove that that's what happened...  An audit is not a penalty. It  
> could either be routine - a number of returns are selected at  
> random every year. Or it could be set off by a "red flag" -  
> something is unusual about the return. It could be perfectly  
> legitimate - as per your example above - but they want to make sure  
> that it is.
>
> But your example is not really what I had in mind. If your total  
> income is 60,000 and you claim $25,000 in cash charitable  
> contributions - you can bet your life that this will set off a red  
> flag and they will want to see your documentation.
>
>> It's all about documentation.  It's also much less about proving
>> expenses, and more about accounting for every dollar you've deposited
>> into your bank account.
>
> That's once you get audited. But tax professionals will tell you  
> over and over again - there are "red flags" that will make an audit  
> more likely. And two of the most often cited red flags are the  
> examples I gave. If you wish, I can post the entire list of this  
> year's "red flags" from Turbo Tax...
>
> Israel Stein
>