Audit triggers to watch out for

Running a close second as to the most popular questions I get is " Will this raise a red flag with the IRS?" What most people don't know is that there are many more audits being conducted without you knowing your beng audited. As more regulations hit the books requiring electronic reporting more information is being gathered about you at the IRS. Brokerage firms are reporting your interest, dividends and stock sales, mortgage companies are reporting mortgage interest, real estate taxes, points and mortgage interest premiums. And the IRS is matching these items up.

Additionally, the IRS has compiled information over many years and has developed averages for many deductions based on income levels. If a return includes deductions too far outside the norms it could get a little extra attention. So here are a few items that will trigger red flags at the IRS:

1. Failure to include ALL of your 1099s like interest, dividends and the like. With the matching up of outside data this is a surefire way to get "fan mail" from the IRS.

2. Larger than normal home office deductions. The IRS thinks this is one of THE most abused deductions taken. As more and more people take contract jobs they look for all the deductions they can get. Everyone should take any legitimate deduction but on this one don't go overboard.

3. Too many losses for your side businesses. The IRS expects any business to show a profit at least 2 in every 5 years. If you can't do that then it is possible they will consider that activity a hobby and disallow your losses.

4. Extra large charitable contributions. Make sure you keep your receipts for any cash contributions. For those non-cash donations to your favorite charity keep a list of every item and it's condition at the time of the donation. Better still there are programs available that assign a value to most of the items donated and will keep track of it for you.

5. Too many round numbers. The IRS is somewhat averse to estimates. The term "Ballpark" is not in the code.

6. Rental real estate losses when you do not activly participate in the management of the property.

7. Extra large unreimbursed employee business expenses.

As I have posted on Facebook before the IRS is targeting self-employed individuals these days so for you mavericks out there all the above is in play plus some. When in doubt documentation is paramount. Better to keep up with those mileage logs all along than to try to create one a couple of years later.

Where is my refund???

How many times I get this question is unknown but let's just say it is a bunch. Taxpayers who have filed a federal tax return and are entitled to a refund have several options to check on the status of their refund. I am not one of them. The IRS says the fastest and easiest way to check on the status of a refund is to access “Where's My Refund?” on the agency website. If a taxpayer e-files, refund information becomes available 72 hours after IRS acknowledges receipt of the return. If a paper return is filed, refund information will generally be available three to four weeks after mailing the return. When checking on the status of a refund, you must enter either a Social Security number or an Individual Taxpayer Identification Number, filing status, and the exact whole dollar refund amount shown of the tax return. As described by IRS, once the personal information is entered, several responses are possible, including: acknowledgment that the return was received and is in processing; the mailing date or direct deposit date of the refund; or notice that IRS could not deliver the refund due to an incorrect address or incorrect direct deposit information. If you file a joint return with your spouse you must use a joint bank account for direct deposit.

Also, don't be surprised if you don't find anything referencing your return within the time frame mentioned this year. The IRS is runnung behind on everything this year purportedly due to the late tax changes inacted by Congress in December of last year.