Jim Beddow, CPA

From CBS Money Watch, here’s some things not to do on your tax returns unless you can support them.  The IRS has a top secret formula for choosing returns for audit.  And remember less than 1% of returns are audited, but that’s 3% of returns with incomes over $200,000.   New tax law changes aren’t in the IRS formula yet. This includes the first time homebuyer credit, the home buyer tax credit and the new car sales tax deduction. The first time homebuyer credit program is loaded with fraud, so much that Congress amended that law to require a closing statement be submitted with the returns that contain that credit.  Here’s their list of things to avoid unless you have good records and can support the deduction:

• Business Use of Your Car – If you’re claiming this deduction you should have a mileage log to support the business use of your car. Anything less is likely unacceptable in an audit.
• Home Office Deductions- This one isn’t worth the trouble but some people can’t resist it.
• High Itemized Deductions like charitable contributions and miscellaneous deductions  for your income
• Non-Cash Charitable Contributions – The last great place on an individual return to lie and the IRS knows it.
• Investment Income Discrepancies
• Math Errors
• Home Buyer Credit
• New-Car Sales Tax Deduction

At the end of the day, audits, audit representation and penalties are expensive.

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