Paying your taxes can be a painful experience after all you have worked your derriere off to make this money and after all the hard work you have to do ahead and pay the government a part of your earning. However, most of us fail to see that most of the resources like roads, civic facilities, health care, police protection etc come from our taxes so the money that you give the government is finally used for your own benefit. Yet it is not unusual to see most tax payers scrambling to get every last cents of tax deduction that they possibly can. Unfortunately, often times some go too far in their quest to pay the minimum possible taxes and end up attracting the IRS's attention.
There are some deductions that can be easily misused and the IRS keeps a special check on people who claim them. Even though like all other deductions these are also provided for a reason, asking for a large amount of deduction will certainly put you on the IURS scanner and may lead to an IR audit.
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Lets talk about one of the most misunderstood and clearly abused tax deduction; the home office. Many people incorrectly assume that just because they work from home they can claim deductions on the entire value of their home. Unless you know the exact criteria and regulations that are associated with large deductions it is highly recommended that you don't make such claims. You have to understand that IRS tax auditors make a living out of spotting your mistakes and the inconsistencies in your tax returns. Actually, the IRS has gone ahead and made their life very easy by granting them access to a system through which they can easily determine any anomalies in your tax return. If you do make the mistake of claiming deductions on the entire value of your home, you can definitely expect some IRS trouble.
Let's move on the two the second deduction in the list of misunderstood claims, your auto advertisement. Many entrepreneurs make good use of vehicle signs to advertise their business but this certainly does not mean that you can deduct all the auto expenses just because you have an advertisement on your vehicle. You need to understand that as far as advertisement claims go, you can only get deductions on the amount that has actually been spent on advertising; In this case, that would just include the cost of the banner and the pain to put up the advertisement on the car. You can claim for some deductions on your auto expenses. Calculate the mileage of your car which has been invested for business purposes divide this by the total mileage to get a percentage and that should be the percentage of your auto expenses that you can get a deduction on. For example, if your total annual mileage is 16,000 and you have used 4000 miles for business, you can claim 25% of your total auto expenses as deduction. Ensure that you keep an accurate record of auto usage preferably with documents so that you can furnish this information in case of an IRS audit.
One of the strangest deductions is that claimed on body parts. Some people pledge their body parts to a scientific organization and expect tax deductions in return. You need to understand that you are only eligible for deductions on donations to non profit organizations if you have transferred one hundred percent ownership to the NGO. Since in this case you still get to keep the organ as long as you are alive you cannot claim a deduction on it.
If you are unsure about the deductions that you are eligible for get in touch with an accountant but do not file claims with half baked information. in case you have already filed incredulous claims and have just realized your folly, this may be a good time to get in touch with a Dallas tax attorney in Dallas/fort worth if you live there or any other tax attorney in your area.
Finally Revealed! Tax Deductions That Can Get You in Trouble With the IRS
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