There are many types of deductions that the income tax payer deduct from his income before filing tax returns. What gets you audited by the IRS? The most common tax deductions that are questioned by the IRS are:
Home office deduction
The Office deduction is only allowed if you use the space for office. If you use the same space for family school projects, online shopping, a guest room other purposes than you don’t get the exemption.
Meals, travel and entertainment deductions
Meal, travel and entertainment expenses must match up with the nature of the business. If you are a small business and you deduct large amount of money for your meals etc, auditor will question your records.
Claiming 100 percent of vehicle use
You can only claim exemption of vehicle use, if your vehicle is used purely for official purposes. If the vehicle is used for personal use as well you are not allowed to add it for tax deduction.
Don’t show losses for consecutive three years
If your business loses money every year, the IRS will view the activity as a hobby; no losses may be taken for hobbies. A business must net positive income at least three out of the last five years to be considered a business that may take a loss against other income.
If you show losses or ask for unrealistic deductions in your tax return, the auditor will surly question your tax returns.
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