The deadline to file your 2012 tax returns is April 15th. If you've waited until the last minute, there are a few problem areas you may want to be aware of as you hurry to meet next week's deadline.
Certified Financial Planner, Scott Cole highlights a few filing actions that may flag your return for an IRS audit.
- UNREPORTED INCOME: "IRS computers match up the income listed on W-2 and 1099 forms with the income reported on individual returns." If you should have reported it and didn't, odds are, they know about it.
- OPERATING A CASH BUSINESS: "If you operate a small business in which you're generally paid in cash - for example, a car wash, restaurant or tavern, or a hair or nail salon - the IRS is more likely to examine your return. History indicates that cash-heavy taxpayers may under report their income or, in some cases, not report any income at all. So the IRS remains on high alert."
- TRAVEL AND ENTERTAINMENT EXPENSES: "This is often a prime audit target. IRS agents particularly look for self-employed individuals and other business owners who claim unusually large write-offs for travel and entertainment expenses and meals. Note that the tax law includes strict substantiation rules that must be followed to deduct any of these expenses."
- HOME-OFFICE DEDUCTIONS: "If you qualify, you can write off your direct costs of using part of your home as an office, plus a percentage of everyday living expenses such as property taxes, mortgage interest, utilities, phone bills, insurance, etc. But the basic rule is that you must use the office "regularly and exclusively" as your principal place of business. Simply doing work at home when your main office is elsewhere won't cut it."
You can catch more financial tips for Scott Cole every Wednesday at 11:00a.m. on Alabama's 13 News Midday.