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MoneyWatch.com Executive Editor Jack Otter offers tax tips to help reduce the risk you will be audited by the IRS.
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The deadline for filing your tax return as fast approaching to reduce your chances of being audited this year.
Well you need to know what the IRS considers big red flags here to explain Jack otter.
He's executive editor of money watch dot com Jack welcome back to the show great thank you -- to be -- -- if so what -- with the IRS completed all -- -- and the blue they're saying that they're putting more agents in the field than ever before.
It really sounds like they're going after people particularly people who were a lot of money.
Exactly the big thing is what's called a schedule C.
And I know about this because I'm about to get one I've written them a lot terrorists get a -- a schedule C I'll have to file one this year because I wrote a book.
That income is different from the incoming get from my regular job.
And the truth is there's a lot more room for abuse.
Look if I take you out to lunch and I tell my boss hey this is a business lunch I got an expensive and that's done with.
But on my book -- also I can deduct right I can say well I had to drive my car to go interview someone I had to take Jerry out for drinks and have a lot of fun with -- also to things like that so.
In the last year that they check the IRS found 100 in -- 1099 forms if you do a little part time job.
They have to send your 1099 people -- telling the IRS about that.
So did you know it's like Willie Brown a look at where the money is and that's where the finding our thoughts are about how my office -- sure that's one of the big ones on schedule C right I work I wrote my book from home -- -- -- -- deduct.
That cost of that room where I wrote it.
Well I can only do that if that is nothing but an opposite I've got a big screen TV and there and I invite friends over to watch football so forth can't deduct it some people ought to be really careful the IRS knows that's abuse so they'll check it.
-- -- you know we talked about cars.
And it's interest saying a lot of people want to claim -- commute can you do it he cannot claim your commute that is not deductible.
You can claim a vehicle if you really do -- use it for business so if -- painter contractor.
You know it it's pretty clear whether you using that truck for contracting or going away on the weekend.
It has to be more than 50%.
Business then you conducted the percentage of which -- -- for business.
You know a lot of people want to say -- schedule C -- -- but what they're really doing is that they have a hobby right and they get a little money from -- -- have not much how does the IRS -- that sure it's a very treats that judgment -- look at -- put some pictures of my cute kids up on Flickr -- -- -- by the -- can buy -- from me.
That's probably a hobby -- if I write a book I hope -- -- this -- -- -- business you really -- intend to make money -- of this.
And so do you -- that -- the business that I can deduct things from those profits.
The general test is is there any hope of actually making a profit so it's okay to have a business that loses money you can take those deductions.
But if in all honesty it doesn't look like something that's ever gonna actually make you money the probably called hobby.
And I'll come after -- -- as they're going after many people obviously you wanna talk to your accountant about any decisions you're making on this basis her.
But one point I think we should make here is you don't have to go out and hire really expensive accountant to -- CPA somebody you can do the books for businesses -- you actually -- Latin higher at what they call enrolled agent.
Which is going to be cheaper and it's actually somebody who has a lot of experience with the IRS.
Yes and it did your level handling returns of your -- that's a very good idea it's a good idea -- people are coming up on the deadline hard and fast right now and others a lot of people out there who are probably really nervous about what's going on right now.
Who would be your advice to people for coming up on April 15.
Deadline one of them I haven't filed yet and haven't filed well -- if you're worried about deductions.
It's really important to make sure that you have a record so nobody should ever shy away from taking about deduction you know don't think they'll unlike their -- -- not gonna do that.
But also make sure that of course you know give -- the smell test is it valid and then make sure that if someone asks you questions about it you've got proof and your rolled agent can certainly help tell you look he needs photographs of that you need a law and of how you use your vehicle for business expenses whatever it is.
What's really great is how sophisticated the software packages are right now tax cut -- packages.
Not they didn't really take even -- neo fight through the steps of filing.
Tax form and and really complicated ones as well what do you think at what point you actually go out -- -- human being to do your taxes.
I'm a big fan of hiring -- human being it's partly because who I am I just I don't like missiles numbers.
We did actually have somebody file her taxes for different ways she hired an accountant -- used three different levels of software packages.
Now because this woman was apparent.
That tipped it toward the human because he was able to give her suggestions going forward like a five -- nine plan for her baby you can deduct that.
Short of that she found that the more expensive you know the big name that Turbotax that sort of thing.
Was much better than the el chapo plan failed so -- -- it's not say exactly where it was but I would say they're gonna go software.
You know pay up for the good one.
You know one of the headlines we've seen over and over again which I personally find really frustrating as the IRS is slow.
To refund this money this year.
In some cases it's taking in -- weeks maybe a month longer to get the money back and of course I don't like that because it's your money and -- they should be getting a refund anyway.
What is going online with the IRS that they can't turn the stuff for a.
That's a good question now I do now if you wanna quickly the best thing to do is to file online you get much faster you file electronically.
I also saw this is being pushed by people who want to lend you money.
So it's his color revenue -- revenue anticipation.
Contract I believe I wanna go there I you don't wanna go there and you -- said the people who do this or making a big deal about gosh is going to be a long time to leave get your return so I -- file electronically.
Bite the bullet.
The IRS says don't get it to you intend to fourteen business days.
That's the best thing to -- Well refund anticipation loans never make that thank you know on our sort of the -- never the right choice as they -- -- money for your money exactly not a great idea Jack it was terrific to see you thanks for coming on the show today and good luck with your book what's it gonna be called it's called worth it not worth it.
And I hope to come talked about -- -- absolutely we'll see as soon Jack.
