Tax tips

Did you get a tax refund this year? Congrats! However, don’t be surprised if you get audited, too! Why? Because the IRS has revived a program where it audits returns at random whether it appears you did anything wrong or not. They’re hoping it’ll help close the $290 billion gap between the taxes owed and those actually paid. A similar program provided a big windfall for the government a few years back.
Audits found taxpayers claiming dependents with names like Fluffy, but once the IRS required Social Security Numbers for all dependents, the number of children claimed on tax returns dropped by 7 million. There are also red flags that’ll earn your tax return a closer look. Here are a few, courtesy of Rodale Publications:

* The home office deduction is always a red flag because a home
office can be deducted only if you use the space for nothing
else. In other words, a guest room that doubles as an office
doesn’t count!
* Another audit trigger: An unlikely ratio between your income and
deductions. Of course, nobody outside the IRS knows exactly what
ratio raises a red flag, but it’ll raise eyebrows if, say, you
earned $60,000, and claim you donated $10,000 to charity. So if
you end up getting audited, here’s how to cope:
o First, know that you’re not alone. The IRS sends out over 7
million notices for math mistakes with bills for
recalculated tax plus interest. Your best bet it to pay
up, or provide documents or receipts that will validate your
deduction.
o The next audit tip: Pay up immediately. When you owe the
IRS, they assess penalties every day on your tax and
interest. Those penalties can reach 25%. For example, if you
owe $1,000 bucks, it could rise to $1,250.
o File an appeal. A government study found that 41% of
taxpayers who went to the IRS Appeals Division won at least
a partial reduction in the amount of money they owed.

If you’re wondering when your tax refund will actually arrive, you can track your refund’s progress on the website www.IRS.gov.