Cnn tax-tips
-
Upload
bambooagency -
Category
Business
-
view
125 -
download
7
description
Transcript of Cnn tax-tips
10 Tax Audit Red Flags
BY BLAKE ELLIS @BLAKEELLIS3
8/25/2014 You're very charitable - 10 tax audit red flags - CNNMoney
http://money.cnn.com/gallery/pf/taxes/2014/03/14/tax-audit/index.html 1/2
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
Be careful not to overstate your good deeds. The
IRS has calculated the average donation level for
each income range, so anything that far exceeds
those amounts could cause the agency to take a
second look at your return.
You're required to keep receipts for any
donations exceeding $250, and to fill out Form
8283 for any non-cash donations exceeding $500.
Related: 12% of Americans say it's OK to cheat
on taxes
And be realistic: non-cash donations are where a
lot of people often exaggerate, so remember that
the items you're giving to Goodwill should be
valued at the price someone would actually pay for it -- not the amount you bought it for years ago.
"What you think it's worth probably isn't what the IRS thinks it's worth," said Pat Connolly, a tax partner at BlumShapiro.
NEXT: You deduct your home office
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
1 of 101.2kRecommend
You're very charitable NEXT
NEXT
You May Also Like by TaboolaSponsored Links
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
The home office deduction is one of the most
complicated and abused deductions in the tax
code, which is one of the reasons the IRS is
introducing a new, simplified option for claiming it
this year.
In the past, taxpayers who claimed the home
office deduction were required to fill out a
separate form calculating the percentage of their
home's space used solely for the business and the
percentage of expenses that apply to the office,
which can be very complicated to figure out.
But starting this year, you can simply claim $5 per
square foot of workspace, up to 300 square feet.
The deduction will be capped at $1,500 per year and the form for claiming it will be simplified.
That doesn't mean there isn't still room for error, however. The IRS's definition of a home office remains unchanged, and this is where a lot of
people get confused or try to stretch the rules. So remember, just because you work from home a couple days a week or check work emails from
your kitchen doesn't mean you can claim the home office deduction. Your home office must be your primary place of business and used
exclusively for work.
NEXT: You claim bizarre deductions
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
2 of 101.2kRecommend
You deduct your home office BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
Air conditioning for an excessive sweating
disorder, a nose job for a wine taster -- bizarre
deductions like these are likely to spark suspicion
from the IRS. But don't let that stop you from
claiming them if they are legitimate. Both the nose
job and the air conditioning unit were allowed, for
example.
But others, like used underwear donated to
charity or medical bills for pets, were not. So don't
stretch the limit too far, and when in doubt, ask a
tax professional before turning yourself into a
target for the IRS.
NEXT: You're a millionaire
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
3 of 101.2kRecommend
You claim bizarre deductions BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links
CNN Money: How YoungMillionaires InvestCNN Money
7 Reasons You'reProcrastinating (And How ToSnap Out Of It)
How Wealthy People Use CreditCards To Their AdvantageNext Advisor Daily
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
Being rich has its benefits, but not when tax
season rolls around. The more income you report,
the higher the likelihood you'll get hit with an
audit.
While the audit rate stands at a low 1% overall, it
jumps to 9% for people earning between $1
million and $5 million and to an even higher 18%
for people with incomes between $5 million and
$10 million. Among those earning $10 million or
more, 27% face audits.
Related: 4 ways the rich will pay more this tax
season
To avoid being forced to share your wealth with
the IRS, be sure to keep up-to-date records of all income, donations and other transactions.
"The better documentation they have and the more organized they are, the less headaches they will have down the. It's really important to
maintain good records," said Jordan Niefeld, a certified public accountant at tax firm Gerstle, Rosen & Goldenberg, P.A.
NEXT: You claim the same child someone else does
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
4 of 101.2kRecommend
You're a millionaire BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
If your ex files their taxes before you and claims
your child as a dependent, the IRS is going to be
very suspicious when your return comes in
claiming that same child as your dependent.
This often happens when a couple gets divorced
and one parent has primary custody, but the
other still tries to claim the child as their
dependent. Or when a grandparent is the sole
caregiver, but the parent still claims the child as
their own.
Even if you're in the right, the IRS may force you
to provide extensive proof that the child you are
claiming does indeed qualify as your dependent.
"This can happen year after year, even after proving to the IRS you are the one who is correct in deducting the child," said Al Giovetti, a CPA in
Maryland and a member of the National Society of Accountants.
NEXT: You have money abroad
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
5 of 101.2kRecommend
You claim the same childsomeone else does
BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
The IRS has been on a crusade to retrieve money
that's been illegally stashed in overseas accounts.
So even if you have money in a perfectly legal
account abroad, you need to report it or you could
be in big trouble.
Failing to disclose assets exceeding $10,000 that
are held in offshore accounts could result in
penalties, including a fine of up to $100,000 or
50% of the account balance, whichever amount is
greater.
"There are some very wealthy people who
intentionally disregard the rules, but then there
are those people who disregard the rules without
realizing it," said Connolly. "It's better to be safe than sorry (and report everything)."
NEXT: You claim the Earned Income Tax Credit
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
6 of 101.2kRecommend
You have money abroad BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
Fraudsters love the Earned Income Tax Credit, a
refundable credit of as much as $6,000 depending
on your income and how many children you have
(the more children, the bigger the credit). That's
why the IRS tries to make sure that this credit is
only doled out to people who deserve it.
Related: Beware these 'dirty dozen' tax scams
To find out if you qualify for the EITC, use this
tool on the IRS website. And if you claim the
credit, make sure you have documentation
including the Social Security numbers for all of
your children and proof that they live with you --
like letters from their schools or doctors that were
sent to your address, said Giovetti.
NEXT: You deduct gas costs
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
7 of 101.2kRecommend
You claim the Earned IncomeTax Credit
BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
Most employers reimburse you for driving-
related costs like gas. So if you try to deduct
hundreds or thousands of dollars' worth of
automobile costs as a business expense, that's
going to raise eyebrows at the IRS.
"If you happen to work for an employer who
doesn't have a policy for reimbursing you for auto
expenses, the IRS would want to understand your
employer's policy, since generally companies will
reimburse you for any expenses related to the
business," said Connolly.
And if you own a business, you can only deduct
business-related costs. The gas you buy for your
personal driving costs cannot be mixed up in that, or the IRS will ask for documentation of everything.
NEXT: Your "business" is really a hobby
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
8 of 101.2kRecommend
You deduct gas costs BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
Who wouldn't like to turn their favorite hobby
into a business? Year after year, taxpayers
continue to report losses on their taxes from
businesses that are really just activities they like
to do for fun.
But the IRS won't be fooled. The general rule of
thumb is that if the venture hasn't earned a profit
in three out of the last five years, it's usually not a
legitimate business.
Dave Du Val, vice president of customer advocacy
at TaxAudit.com, represented a client in an audit
who had set up a side videography business
where he filmed weddings and special events. It
was his first year in business and he reported a loss. The IRS came after him, saying it was just a hobby and not a business. But after providing
documentation of expenses like advertising costs and showing records of meetings with business strategy experts, it was approved and the
client was let off the hook.
NEXT: You fail to report income
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
9 of 101.2kRecommend
Your "business" is really a hobby BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links
Log InHomepage U.S.
Video Portfolio Enter symbol or keyword
Home Business Markets Investing Economy Tech Personal Finance Small Business Luxury Media
Real Estate Retirement Jobs Autos Taxes College Insurance Money Moves Your Money Video Calculators
1KTOTAL SHARES
597 273 200 124
For many people, reporting income is pretty
straightforward. But for those who earn money a
variety of different sources, it can be easy to
forget a stray account.
Giovetti says some clients forget about small
brokerage accounts they have, and since the IRS
receives information from brokerage firms
directly as well, there's a good chance you'll be
contacted if your records don't match what the
IRS receives. Because investment firms aren't
required to submit documentation for their
clients until the end of the February, it's often a
good idea to wait until the beginning of March to
file your return to make sure the reporting lines
up.
If you worked side jobs and earned more than $600 at any one of them in a year, those employers should send you a Form 1099 so you can
report that income on your taxes as well.
"If you left something off your return, you can be pretty sure the IRS will find out about it," said Connolly.
NEXT
BY BLAKE ELLIS @BLAKEELLIS3 - LAST UPDATED JUNE 03 2014 01:29 PM ET
10 tax audit red flagsFrom being too charitable to claiming the home office deduction, beware these tax audit red flags.
Taxes
10 of 101.2kRecommend
You fail to report income BACK NEXT
BACK NEXT
You May Also Like by TaboolaSponsored Links