Common Errors in Tax Deductions that Get the Attention of the IRS

It's natural for people to try to claim as many deductions on their yearly tax returns. It's understandable that they do not want the IRS any more than they actually have to, and that they want to pay less as much as possible. However, there are some tax deductions that have either been abused too many times or are simply too easy to abuse that whenever anyone claims any of these selected deductions, the IRS begins to notice. Yes, tax deductions are provided for some valid reasons but sometimes, amounts claimed are so huge that any IRS agent will decide to subject that tax return to an audit. It's significant to note that an IRS audit will cause you to have problems related to your taxes.

Deductions related to a claim of a home office are among the most abused deductions. If people work and do business in the house, they think that they can already deduct the total value of the property from their taxes. They simply overlook the criteria that need to be met before anyone can claim for this deduction. If you believe you can get away with this, think again as the IRS has a system that automatically checks for the accuracy of tax returns. When you deduct the entire amount of the house from your tax return, auditors will question you. You must then be prepared as an audit is coming, and perhaps, an IRS issue.

Business owners also think that they can deduct the total amount of their auto expenses from their taxes when they advertise their company's name on their cars. What they should be aware of is that only deductions equal to the cost of paint and other advertising materials can be claimed. Another alternative is claiming for a deduction on a certain percentage of their total auto expenses. This percentage is equal to the car's mileage for business divided by its total mileage. To demonstrate, if your vehicle has a total mileage of 10,000 miles per year and 2,000 of those are used for business, then you're entitled to 20% of your total auto expenses as deduction. This scenario then magnifies the need to keep accurate logs of your mileage so you will not have IRS problems when claiming deductions related to your auto expenses.

Other deductions that routinely pop up on people's tax returns every year are body parts and pets. Yes, people attempt to make deductions on body parts specifically when these are donated for scientific purposes. Unfortunately, in most cases, donations to non-profit organizations cannot be deducted unless 100% of your ownership rights, or interest, is donated. And since this endeavor only involves a body part, this does not qualify for the 100% giving up of your ownership rights. Hence, anyone who claim for deductions on body parts and pets are sure candidates of an IRS audit.