For its Insider Tips From the Pros package, Kiplinger’s spoke with dozens of experts in fields ranging from college aid to travel to glean insights they apply to their own financial lives and share with their own family and friends. Frank Degen, immediate past president of the National Association of Enrolled Agents, revealed these tips for avoiding a tax audit:
“Only about 1% of taxpayers are audited. What triggers an audit is generally something on the tax return that’s out of the ordinary,” he says. “For example, if you have a side business and file a Schedule C, the IRS will flag large losses, particularly if they offset other income. The IRS is looking to see if your activity is a hobby as opposed to a business.
“On Schedule A, large charitable contributions could be a red flag because now you have to have a receipt for every item,” he continues.
“I don’t ask to see every receipt for charitable contributions, but I will specifically ask a client if he or she has receipts for all contributions.
Unreimbursed business expenses are another item you see people get flagged on,” he says. “If your preparer isn’t asking serious questions about these items, you need a new preparer.”
Source : portal.kiplinger.com