These items are only deductible if you itemize. One of the common issues with charitable deductions is people donating to places like Goodwill, but not documenting what was given and the fair market value of the donated items.
Another common item overlooked is volunteer mileage. Make sure you document all of your monetary and goods donations so you can maximize your deduction.
Beginning in tax year 2008, you can add up to $500 ($1,000 married joint) in property tax to your standard deduction even if you don’t itemize deductions. I noticed that a lot of people missed this deduction on their 2008 tax returns.
As in all dealings with the IRS, collections or audit, never adopt a position of guilt. Treat the audit as a routine examination of your records. The auditor has no collection power and can’t do anything against you, other than making up an examination report against you. So don’t be intimidated by them. Never admit to any wrongdoing, even if you have a good excuse. You do not want the auditor to document that you willfully left out income or put down expenses that you did not incur.
This is the beginning stage of fraud and criminal cases against taxpayers. It is really o.k. to say that you forgot, or don’t remember, or that you don’t have a reason for doing something. Maintain your innocence! Be consistent persistent in your responses no matter how much the auditor may push you for further explanation.
Always request a copy of the auditor’s files under FOIA (Freedom Of Information Act) and review it ahead of time. You can then review any 3rd party payer information in advance. If the IRS shows W-2, 1099, or K-1 numbers that are higher than yours, then go to the issuer to resolve it by having them issue a correct one, or do an analysis of your income and expenses to show you didn’t receive that money if you can. There are more things to consider than most people realize. You may even help your auditor to adopt a position against you that may be hard for a representative to change.
One of my businesses was audited several months ago. An IRS agent that I have dealt with in the past called and informed me that my business had been pulled for a field audit. I asked him if he knew the type of business I am in, and proceeded to tell him what pathetic timing he had.
After a couple of meetings, I finally told the agent we could not continue a biweekly series of meetings. We showed him everything, and he finally suggested that we leave the subject return as originally filed.
I understand how stressful an IRS audit can be. I thought our audit was somewhat comical, but my wife was a nervous wreck. The most important thing when dealing with auditors is your documentation. It is of utmost importance to keep all receipts, records, and logs.
