Many taxpayers overlook the long list of deductions that they may take when completing and filing their tax returns. The IRS has estimated that millions of taxpayers overpay their taxes each year mainly because they fail to avail themselves of all of the possible deductions. Here is the seventh part of our multi-part series of blogs on the most overlooked tax deductions:
BUSINESS EXPENSES AS DEDUCTIONS
When it comes to acquiring new equipment for an enterprise, business owners must regularly stay updated on all current, pertinent tax rules and regulations, which constantly change. The tax professionals at the Thorgood Law Firm can help ensure that all taxpayers take advantage of any and all deductions that may apply to them.
People typically think that the amount of their income is the biggest red flag that attracts an IRS auditor, and they would probably be right. But what are some of the other items on a tax return that may attract their attention? Some say that simple, plain returns are fairly safe and likely to avoid extended scrutiny by IRS auditors. According to the IRS, there are multiple ways a return may end up audited, here are some examples:
Working at the IRS or representing clients before the IRS has its perks and advantages. Having the opportunity to observe all of the outlandish and bizarre attempts by taxpayers to assert legitimate,valid tax deductions is rare. On one hand, it certainly may involve the observance of a unique form of comedy. Here are some odd, crazy, unusual, and please note, unsuccessful tax deductions:
*Crazy Home Office Deductions
A woman that ran a home business tried to deduct what was basically her home refrigerator. She explained to her tax professional that she kept drinks in the refrigerator for customers and other business associates that came to the home office for meetings. According to the owner, this occurred four or five times a year while the refrigerator was in her kitchen and served her family.
It’s considered by many taxpayers to be one of the most frightening events that could happen related to their everyday business affairs. What is this frightening event? An IRS audit, of course. But is a tax audit really that scary in real life? The numbers reveal that only 1% of all taxpayers experience an audit, and of this one percent, about one in five result in a meeting with the IRS.
Presently, the IRS audits half as many taxpayers as it did five years ago. However, the amount of tax recovered per audit has increased. The IRS uses an elaborate computer selection process, auditing only those returns which will almost certainly yield some adjustment.
You’ve filed all of your tax returns, and because of your level of income you find yourself in the class of taxpayers whose return is more likely to trigger an IRS audit. So you wonder, how long does the IRS now have to audit you?
Due to disclosure requirements, the IRS makes contact with a taxpayer selected for an audit by telephone or mail only. When returns are filed, they are compared against norms for similar returns. These norms are developed from audits of a statistically valid random sample of returns, selected as part of the National Research Program conducted by the IRS to update return selection information.