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Comparing Your Itemized Deductions with the Averages

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Jun 22nd 2015
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Size matters, even at the IRS. Its ever-vigilant computers might go bananas because your itemized-deduction totals are well above the national averages for individuals in your income range.

Take a close look at the table below. It is based on IRS statistics and shows average deductions on returns filed in 2012 for the 2011 tax year, the latest one for which figures are available. The averages are based on adjusted gross income (AGI).

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AGI                    Medical Expenses     Taxes      Interest      Charitable

                                                                                               Contributions                     

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Under $15,000:            $8,675              $3,231        $6,979          $1,501

$15,000 to $30,000:     $7,688              $3,310        $7,190          $2,184

$30,000 to $50,000:     $6,939              $3,932        $7,047          $2,404

$50,000 to $100,000:   $7,988              $6,201        $8,310          $2,990

$100,000 to $200,000:  $9,634             $10,848      $10,399        $3,939        

$200,000 to $250,000:  $17,667           $17,556      $13,344        $5,667

$250,000 or more:         $33,521           $49,986      $18,786       $22,001

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Source: Wolters Kluwer Tax & Accounting US

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IRS officials release their statistics with an admonition: The numbers are national averages; they aren't allowable amounts for anyone. IRS auditors allow deductions only for actual payments. They require substantiation of itemized deductions in the form of canceled checks and the like.

National averages may provide an important clue to your chances of examination. The audit odds decrease if your deductions stand out as unusually high compared to amounts being claimed by other taxpayers in your income class. You're not home free even when auditors are satisfied that all itemized deductions are substantiated. They might challenge other items on your return for the year in question and also decide to scrutinize returns for earlier or later years.

On a personal note, my work in several jobs with the IRS included an assignment in Chicago as one of its special agents. That is the official title for the agency's criminal investigators, popularly known as T-Men. Their task is to investigate criminal violations of the Internal Revenue Code.

While my gumshoe stint was five decades ago, I still clearly recall the case of a man of modest means who claimed charitable contributions way out of line with the averages. I quickly concluded the case, as he was a Seventh Day Adventist whose unusually generous practice was to tithe 10 percent of his gross salary before any subtractions for taxes – a pattern of giving that was corroborated by church records.

Going in the other direction, suppose the IRS's computers don't flag your deductions as audit-worthy. Instead, you discover that your itemized write-offs fall significantly below the averages. Perhaps you neglected to claim some perfectly legal, but often missed, deductions like unreimbursed out-of-pocket expenses incurred to do volunteer work on behalf of schools and other charitable organizations. There are a number of possibilities. These averages should prompt you to take a closer look at filing time.

Just because you claim average deductions or receive a refund doesn't mean that you can forget about an audit. The IRS still can ask you to explain deductions and other items on your return. In fact, it happens every day.

When Robert G. Wells received a refund, he thought that meant the IRS needed no information from him. So he threw out his records – a step that came back to haunt him when the IRS disallowed car-expense deductions and demanded the refund back. Robert struck out with the Tax Court because he was unable to substantiate the disputed expenses.

About the author:
Julian Block writes and practices law in Larchmont, New York, and was formerly with the IRS as a special agent (criminal investigator) and an attorney. More on this topic is available from “Julian Block's Year Round Tax Strategies,” available at julianblocktaxexpert.com.

Related article:

How to Time Itemized Deductions

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