IRS Red Flags, How To Avoid An Audit - WMDT 47 News - Delmarva's Choice

SALISBURY, Md - As tax season begins, experts say filers should be cautious when making their claims. Studies from Kiplinger revealed the 12 biggest mistakes tax filers can make to raise red flags from the IRS and can increase the chances of the filer being audited. Some of these include failing to report all taxable income, taking large charitable donations, claiming the home office deduction and even making too much money.

"Let's say you're in the 30% tax bracket and they disallow $5000 worth of expense or pick up $5000 worth of income. 30% of $5000 will cost you $1500, then they are going to turn around and send a notification to the State of Maryland and it's going to cost you another 7 or 8 %," says Edwin A. Rommel, a certified public accountant.

While charitable deductions are a great tax write-off, experts warn filers to make sure they do not exaggerate in their claims.

"Charitable deductions, believe it or not, have a ceiling on them. I don't think the general tax payer has to worry about that, but the fact is if you have the receipts for what you gave, in other words, you have clothing that you don't wear anymore, take it to the Salvation Army or Good Will. Their going to give you a receipt for it. And write down what you gave and that could be a deduction. They're helping, you're helping, less lower income individuals and government gives you income for that. Also if you give to your church, you're gonna get a receipt that is a tax deduction. If you have the receipt, the government can't second guess it. But if you claim, something and you get asked about it and you don't have your receipt, then you can get in trouble." says Bob Lockwood, sole proprietor of Essentials Accounting LLC.

Experts say preparation is key. Lockwood says, "You want to make sure that whatever comes in the mail during this month, the month of January, you look at everything and whatever comes as income is concerned."

If you follow the rules, cause for concern is slim.

Rommel says, "Most of us would like to make more money and as long as you file an accurate tax return, you don't have to worry about an audit."

The IRS plans to start processing individual tax returns on January 30, 2013. For more information click here.

For more tips on avoiding audits from Kiplinger, click here.