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Tax Audit Red Flags: 11 Things That May Get the IRS to Pick You

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Audit
Cassandra Hubbart, DailyFinance
By Blake Ellis, @CNNMoney

Worried about a tax audit? You don't have to be.

Audits are avoidable, and it's not just about following the rules. From outlandish charitable giving to working in your own home office, you could be singled out if you hit a nerve with the Internal Revenue Service. Here's what the IRS looks for and tips to help you avoid getting chosen.




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What is IRS Form 8824: Like-Kind Exchange

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.

What are ABLE Accounts? Tax Benefits Explained

Achieving a Better Life Experience (ABLE) accounts allow the families of disabled young people to set aside money for their care in a way that earns special tax benefits. ABLE accounts work much like the so-called 529 accounts that families can use to save money for education; in fact, an ABLE account is really a special kind of 529.

What is IRS Form 8829: Expenses for Business Use of Your Home

One of the many benefits of working at home is that you can deduct legitimate expenses from your taxes. The downside is that since home office tax deductions are so easily abused, the Internal Revenue Service (IRS) tends to scrutinize them more closely than other parts of your tax return. However, if you are able to substantiate your home office deductions, you shouldn't be afraid to claim them. IRS Form 8829 helps you determine what you can and cannot claim.

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

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kayo1025

Extremely charitable is a mistake?

April 15 2012 at 8:02 PM Report abuse rate up rate down Reply
rudniski136

We got audited because we rolled over some money and the company we rolled the money to didn't report the rollover to the IRS. I almost had a heart attack when I received the IRS letter. At least the agents were pleasant to deal with.

April 15 2012 at 10:02 AM Report abuse rate up rate down Reply
Hoosierladyus48

Why is it if you owe the IRS, they penalize you and charge you interest? My b/f is getting a refund back, but the IRS has been sitting on his check for over 2 months now. There has to be someone out there who can go up against them.

April 15 2012 at 6:39 AM Report abuse +1 rate up rate down Reply
1 reply to Hoosierladyus48's comment
papadon.don

LADY... B/f simply paid the crooks too much withholding over the year... very costly. If he adjusts w/h, he'll have more spendable $$$.... the IRS preys on ignorance.

April 15 2012 at 8:39 AM Report abuse rate up rate down Reply
dterraman

thousands of well armed government employees are all too willing to help releive you of your property

April 14 2012 at 12:17 PM Report abuse +1 rate up rate down Reply
Carol & Jay

They got me bent over the barrel again this year...

April 14 2012 at 11:32 AM Report abuse +2 rate up rate down Reply
sexyspeedcat1

crap im screwed

April 12 2012 at 6:30 PM Report abuse +1 rate up rate down Reply
tonynaps

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April 12 2012 at 5:51 PM Report abuse rate up rate down Reply
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April 12 2012 at 4:45 PM Report abuse -1 rate up rate down Reply
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