Commerce Clearing House has prepared a list of red flags that are likely to trigger an audit of your tax return. If you want to avoid an audit, avoid these items, according to the article which appeared in, among other places, the Washington Post. On the other hand, if you want to call attention to your tax return and make sure the IRS pays special notice to you above all of the other returns they process, by all means, try some of these ideas!
The IRS will automatically disallow these items if they appear on your tax return:
- A loss on the sale of your house or personal property
- Claiming a filing status of surviving-spouse for more than two years
- Medical expense deduction for health-club dues, funeral expenses or diet foods
- Itemized deductions for sales taxes paid or import duties
- Itemized deduction for personal interest, such as interest on credit cards or auto loans
- Itemized deduction for personal insurance, except medical and long-term care insurance
- Moving expense deduction in excess of legal limits
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To stay buried comfortably inside the huge pile of 2000 tax returns, mind the following:
- When married filing separately, both spouses must itemize or both must take the standard deduction. No mixing and matching.
- Be careful to report the precise numbers listed on your W-2 wage statement and 1099 statements of interest, mutual-fund gains, dividends, pensions, etc. The IRS matches these numbers with the amounts that appear on your tax return. Innocent discrepancies can trigger an audit.
- If you received an incorrect W-2 or 1099, immediately ask the issuer to file a corrected form, to avoid sending up a red flag.
- Make sure the numbers on your tax return are consistent with those on the return of any partnership or S corporation you are a part of.
- If you have been audited before, don't repeat past mistakes. The IRS never forgets!
- If you sold a piece of investment property that you had depreciated, make sure the gain or loss that you report this year reflects the costs and write-offs you claimed in previous years.
- If you claim unreimbursed employee expenses, keep proper records and make sure you deduct meals and entertainment expenses correctly (usually only 50 percent is allowed as a deduction).
- Make sure you deduct only the work portion of a car or computer that's also used for pleasure.
- If you own a business, know that the IRS is paying close attention to companies that have few employees and many independent contractors for whom the business pays no employment taxes.
originally published March 5, 2001