Q: Is it true that if I claim the home office deduction on my federal income taxes, I’ll automatically be audited?
A: This is a myth that may have had its genesis in reality at some point. Today, however, the IRS is much more sophisticated in how they approach and determine audit flags. The at-home office deduction is only one of many deductions that are monitored for potential abuse.
The IRS’s take on it is pretty straight forward: "If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. "
So what are the requirements for taking the at-home office deduction? They are as follows:
- Regular and exclusive use – it has to be an area of your home or area of your house fully dedicated to use as your office.
- Principal place of business – it has to be your primary office
The IRS’s rules get a bit more granular than this and they require fairly thorough documentation related to expenses, but if you qualify for the deduction you should take it.
If you have questions about whether it’s appropriate for you to take this deduction, let’s talk.
Q: Is it true that filing an extension will cause you to be audited by the IRS?
A: In a word: No. In fact, data suggests that the opposite is true. By filing an extension, you are statistically less likely to be audited. The IRS no longer looks at a single audit trigger. They weigh a number of factors and examine key metrics. The key is, if you only take deductions that are appropriate, an audit isn’t an issue.
If you have questions about the new tax laws, give Zinner & Co. a call.
Q: Is it true that an IRS audit requires you to appear in-person and provide documentation on all of your tax materials?
A: Not usually. The majority of audits are done by mail and consist of providing copies of receipts or proof of income for one particular part of your taxes. A classic example is providing documentation for charitable deductions. In the majority of cases, once you provide receipts the audit is concluded.
You can read more about tax audits and how to handle them here.