Avoiding life’s big three threats!

Some of us feared three big threats facing us as we got older. They are:

  • A prostate exam.
  • A quasi-homicidal hairdresser.
  • An audit by the Internal Revenue Service.

Not necessarily in that order.

Turns out there is not a lot one can do to avoid some of the perils of adulthood. In the case of the IRS audit, the numbers are on our side. Relatively few people get audited. But when they do, WHAM!

But there are things you can be doing now, and in the future, to avoid the ordeal. And that’s the subject of today’s Your Turn show, with guest Tom O’Rourke. He’s an estate and tax attorney — and was a long-time lawyer with the IRS. Catch the show live at 10 a.m. ET streaming here or on the radio at 1500 AM in the D.C. area. The good news, he says, is audits aren’t very common. Your odds of avoiding an audit are good. But for many people, good is not good enough. And there are things you can do, and things you shouldn’t do, to avoid an audit.

Here’s his 14-point look at tax practices that impact triggering an audit:

A goal of many taxpayers is to avoid having their federal income tax return audited by the IRS. This has really been quite easy in recent years. For the most recent year which information is available, 2019, only .4% of all returns (40 out of every 100,000 returns filed) have been audited by IRS. The President has proposed increasing IRS enforcement efforts, and the audit rate may increase in the future. Here are some of the factors likely to increase the chances of an audit:

  1. If your income is more than $200,000 per year, the likelihood of an audit is increased. The audit rate for persons with income of between $200,000 and $1 million is 1%, and for persons with income of more than $ 1 million, it’s 2.4%.
  2. Failing to report all income. Third party payors such as financial institutions, employers, or customers report income paid to the IRS. If a taxpayer fails to report this income on their tax return, they are likely to receive a notice from the IRS.
  3. Claiming higher than average itemized deductions and, in particular, large charitable contribution deductions. Any noncash deduction of more than $500 requires the filing of Form 8283 and may require an appraisal.
  4. Operating a business.
  5. Claiming rental losses. While you can claim losses of up to $25,000, this deduction amount phases out for persons with adjusted gross income (AGI) of more than $100,000 and is completed phased out if AGI is more than $150,000.
  6. Failing to file a tax return. Because entities that pay you income report this income to the IRS, the IRS is likely to know that you have not filed a return and is more likely to contact you.
  7. Deducting losses incurred in pursuing what IRS considers a hobby.
  8. Claiming a home office deduction.
  9. Taking an early distribution (before age 59½) from a tax deferred retirement plan.
  10. Incorrectly reporting alimony that is either paid or received.
  11. Engaging in cash transactions of more than $10,000.
  12. Claiming a deduction for gambling losses.
  13. Failing to report a foreign bank account.
  14. Claiming the foreign earned income exclusion.

An important factor in dealing with tax issues is to claim what you are entitled to, keep records to prove your activities — and don’t worry about an IRS audit.

If you have questions for Tom, please send them to me at mcausey@federalnewsnetwork.com before we go on air.

As for other threats, you are pretty much on your own!

Nearly Useless Factoid

By Alazar Moges

“Snake Island” in Brazil, officially known as Ilha da Queimada Grande, is located 90 miles off the coast of São Paulo and is home to thousands of lancehead vipers, one of the deadliest snakes in the world. Though few feel compelled to go to the terrifying island, the government very strictly controls who can make the trip, requiring a doctor to be present on any sanctioned visits. It is the only home to the endangered species.

Source: Smithsonian Magazine

Related Stories

Comments

Your Turn with Mike Causey

WEDNESDAYS at 10 A.M.

Learn about everything from pay, benefits and retirement, to buyouts, COLAs and pay freezes. Call the show live Wednesdays from 10-11 a.m. at 202-465-3080 with your questions. Dial 605-562-0264 to listen live from any phone. Follow Mike on Twitter and send him an email with your questions and comments. Subscribe on Apple Podcasts or Podcast One.

Sign up for breaking news alerts

THRIFT SAVINGS PLAN TICKER

Jun 15, 2021 Close Change YTD*
L Income 23.0068 -0.0027 2.88%
L 2025 11.8689 -0.0035 5.61%
L 2030 41.8865 -0.0167 7.07%
L 2035 12.5816 -0.0057 7.71%
L 2040 47.6199 -0.024 8.36%
L 2045 13.0490 -0.0072 8.91%
L 2050 28.5935 -0.0173 9.49%
L 2055 14.0581 -0.0104 11.70%
L 2060 14.0580 -0.0104 11.70%
L 2065 14.0579 -0.0104 11.69%
G Fund 16.6053 0.0006 0.53%
F Fund 20.8110 -0.0002 -2.22%
C Fund 63.6469 -0.1262 12.61%
S Fund 84.3757 -0.5131 11.60%
I Fund 39.7836 0.1307 10.58%
Closing price updated at approx 6pm ET each business day. More at tsp.gov
* YTD data is updated on the last day of the month.