The Internal Revenue Service (IRS) expects to receive millions of tax returns during the 2022 tax season. And with budget cuts, staffing shortages and ongoing pandemic issues, the agency has no neither the time nor the resources to thoroughly examine everyone’s feedback. But that doesn’t mean you’re not in danger of being audited. According to Jackson Hewitt, more than 771,000 million people were audited by the IRS in 2019. And experts warn that if you claim two specific deductions on your return, you could open yourself up to closer scrutiny from the tax agency. Read on to find out which write-off you’ll want to look into carefully.
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The taxpayers are willing to claim deductions on their tax returns. Deductions reduce the amount of your taxable income, which could mean you owe less to the IRS or even get more money back in your tax refund. Unfortunately, some people try to fraudulently claim deductions to which they are not entitled, which is why the IRS pays special attention to write-offs.
“Accepting write-offs disproportionate to your income tends to set off red flags,” Sarah Yorkan agent registered with the IRS and internal tax expert for the Tax Keeper, explains. According to Samantha Hawrylacka personal finance specialist and co-founder of How To Fire, claiming too many deductions that you aren’t eligible for can lead to an audit.
Two deductions in particular are more likely to attract the attention of the IRS. According to Dmytro Serheiva professional tax specialist and co-owner of PDFLiner, the home office deduction is one of them. “If you use part of your home for business purposes, you may be able to deduct expenses related to the business use of your home. home office deduction is available to landlords and renters, and applies to all types of homes,” the IRS explains on its website.
Charles Corselloan agent registered with the IRS and President of TaxCure LLC, confirms it has seen “higher review rates among those claiming a home office deduction.” After all, there are certain conditions to claim this. According to the IRS, a portion of your home must be regularly and exclusively used for business purposes, as well as be a principal location of your business for this write-off.
You also need to identify what part of your home is an office, which can set off other red flags. “The home office deduction is a good example of a business write-off that people tend to abuse, so the IRS is more likely to flag it if it seems excessive,” York previously said. Better life. “For example, if you claim your office is 80% of your home, that’s probably too much.”
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However, you should not only pay attention to the home office deduction. crystal strangerthe international tax director for GBS Tax and author of The small business tax guide, says taking an automobile expense deduction is also likely to attract the attention of the IRS. “Claiming large amounts of auto expenses is a big red flag for getting audited, especially if there’s virtually no income at stake,” she previously said. Better life.
Claiming an automatic deduction is particularly suspect because it is often used incorrectly. “Automotive expenses are deductible only for amounts used for business, not for travel or other activities,” Stranger explains. “Claiming a 100% business deduction for automobiles is extremely rare.”
According to the IRS, you can deduct all costs ownership and operation of your car only if it is used solely for business purposes. But if you use your car for both business and personal purposes, you are only allowed to deduct the cost of its business use. And you must be able to save the expenses you claim. “The law requires that you support your expenses with adequate records or sufficient evidence to support your own statement,” warns the IRS.
But if you qualify for a home office or automobile expense deduction, you should still take it. Dana Ronalda tax specialist and the CEO of the Tax Crisis Institute, says taxpayers can end up having their tax refunds delayed if they don’t claim all of their deductions. And the most commonly missed expenses include job-related expenses and home office deductions, as well as student loan interest, charitable contributions and medical expenses, she says.
“If you have the proper documentation for your deduction, loss, or credit, don’t be afraid to claim it,” say the experts at financial site Kiplinger. “Never feel like you have to pay the IRS more tax than you actually owe.
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