How To Avoid IRS Audit Red Flags
The IRS recently announced a simplified way to take a home office deduction - long considered a potential red flag for an IRS audit - that will be available for the 2013 tax year. The new deduction gives taxpayers the option of deducting $5 per sq. ft. for up to 300 sq. ft. of office space, for a total of $1,500.
However, those filing their 2012 tax returns that want to take the home office deduction won't have this option. Instead, you will still need to file a Form 8829.
While there is no formal list of what may trigger an IRS audit, a recent Forbes.com article lists some likely culprits:
· Not reporting every Form 1099
· Not reporting every form K-1
· Reporting hobby losses on Schedule C
· Over-reporting noncash charitable donations
· Not paying a fair S Corporation wage
· Not keeping good records on real estate losses
· Excessive travel and entertainment expenses
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