7 Tax Audit Red Flags – TaxWatch | MarketWatch.com | Andrea Coombes | 4/2/12

People filing tax forms in 1920Taxpayers overall face a low audit risk: The IRS audited 1.1% of all individual tax returns filed in 2010, but the risk of an audit skyrockets for some: 12.5% of all taxpayers whose income topped $1 million faced an audit and 4% of self-employed people who filed a Schedule C with gross receipts of $100,000 or more.

Here are seven red flags:

1. Schedule C. Check out BizStats.com for an idea of whether your numbers are out of line; IRS agents review this site for average business costs.

2. Rental losses.

3. Over-the-top deductions. CCH Inc., a Wolters Kluwer business, publishes average amounts for some popular deductions. See the CCH page.

4. Business or hobby?

5. Business use of a car.

6. Home-office deduction.

7. Earned-income tax credit.

For full description of these “red flags” and full article see: 7 tax audit red flags – TaxWatch – MarketWatch, by Andrea Coombes, personal finance editor based in San Francisco.

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About vinhsu

Center City Philadelphia General Practice Law Firm with emphasis on Criminal Defense, Family Law, Immigration, Real Property, and Wills/Trusts/ Estate Planning. Licensed in Pennsylvania and New Jersey.
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