Budget cuts have led to some big changes for the IRS in the 2014 tax season, including fewer audits due to lack of employees. But that doesn’t give you carte blanche to claim anything and everything on your taxes. Here are some filing faux pas you should avoid to keep the tax man from knocking on your door.
Come on … you’re not THAT charitable
The IRS has calculated the average yearly charitable donation for each income range. So if yours far exceeds that, you’re likely to get some extra unwanted attention from the IRS. You’ll need receipts for all your donations if they total more than $250, and you’ll need to fill out a Form 8283 if your donations are above $500. Plus, make sure your donations are going to a qualified charity. You can’t deduct money given to individuals, candidates or political organizations.
Not reporting all your income
Remember, the IRS gets copies of all the forms you get copies of. Don’t think they won’t notice when you “forget” to include all your income.
If you like having coffee with an auditor amid a pile of paperwork, by all means, try to deduct your dog’s psychotherapy session on your taxes. But if you can prove that your “strange” deduction is, in fact, legitimate, you may be able deduct it after all. Strange deductions arouse the attention of the IRS, however, and may not be worth all the trouble of an audit.
Some funny deductions that are perfectly legal:
- Clarinet lessons if your child has an overbite
- Smoking cessation aides
- Costs associated with a guard dog for your business
- Breast enlargement surgery for adult performers
- Body oil for body builders
Your Home Office Deduction
Taking the home office deduction used to be a much more complicated process, and it has been often abused by taxpayers. Griping about work while eating breakfast does not make your kitchen a home office.
The IRS implemented a simpler option for deducting home office space last year. Rather than the old complex formula, taxpayers can now deduct $5 per square foot of space that is used exclusively and regularly for business. (Maximum 300 square feet)
The devil’s in the details
Fill in every space on the form that applies to you, even if it is just with a zero or an “n/a.” You want to give the IRS agent absolutely no reason to think you made a mistake. On that note, make sure to check your math and use handwriting that would make your 1st grade teacher proud if you do a paper return.
Not filing – and then bragging about it
The IRS will miss you when you’re gone. If you suddenly stop filing taxes, you’ll raise the IRS’ “missing taxpayer” radar that could lead to an audit.
And if you tell someone you’re dodging your taxes, beware. The IRS offers up to 30% of the tax and penalties it collects to whistleblowers who alert them to tax cheats.
About Capital Solutions Bancorp
Capital Solutions Bancorp provides working capital funding to businesses just like yours every day. If your company needs working capital to grow, or if you’d like to have a backup plan in place for unexpected expenses, call Capital Solutions Bancorp today at 800-499-6179 or visit us online at www.capitalsolutionsbancorp.com.