4. Taking questionable deductions or credits
Experts generally agree that claiming excessive charitable contributions and claiming a home office are two of the deductions most likely to raise red flags with the IRS.
If you donate a large percentage of your income to charity, be sure to keep careful records. Too many contributions relative to your income can be a problem. So, think twice about inflating the value of those items you dropped off at the thrift store.
Keep careful records of all donations and get a written acknowledgement from any charity to which you donate $250 or more per year.
As for the home office, take the deduction to which you’re entitled, but be ready to defend it if needed. The most important thing to remember is that you can only deduct a home office if you use that space exclusively for business.
Under the category of credits, abusing the Earned Income Tax Credit is likely to get you in trouble, according to experts.
Back in 2013, the IRS came under fire for not taking enough action to curtail improperly awarded Earned Income Tax Credits. In a statement reported by multiple news outlets, the agency fired back by saying EITC claims were twice as likely to be audited as other returns. If you claim the EITC, consider yourself warned.
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