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Friday, November 30, 2007

Tax Mistakes To Avoid

The IRS audited 1.3 million taxpayers in 2007, an increase greater than 5 percent more than the previous year. With Bush’s new budget, more audits may be on the way. Watch that the new tax rules don’t trip you up this season. Avoid these mistakes that are likely to trigger an IRS audit this year.

1. Earning too much money
Once an income reaches the $100,000 range, the chance of audit increases. Most people would hate to have this problem, but high income earners are more likely to end up on the IRS’s audit list.

2. Giving too much to charity
Charitable contributions in excess of 5 to 10 percent of the taxpayer’s income may concern the IRS. The rules for charitable deductions have become more strict and require more documentation, a reaction to suspicions of abuse by taxpayers.

3. Taking too many credits
Tax credits are another flag, especially earned income credits and credits for education and seniors. People often take credits they’re not entitled to so the IRS monitors this closely.

4. Careless errors
Something as slight as a sloppy return can call attention to your return. Incorrect Social Security numbers, errors in math, and misspelled words are details that the IRS scans with care.

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