Daniel Cullinane CPA

25 Plaza 5 25th fl Jersey City NJ                                          phone 732-516-1648 fax 732-516-9778

MBA Taxation

You have heard all the usual reasons the IRS flags tax returns for audit: You earned alot of money last year, you claim deductions way out of line with your income, you try to write off your living room as a "home office" ect.Those are all still good to keep in mind, but tax pros say the IRS is eyeballing a few new things this year too. Here are a few surprising things auditors are looking for in their search for red flags.

You have overseas cash. To the extent anything is really new in terms of red flags, ti would probable be the focus on offshore bank accounts.
You make money from the sharing economy. There are an estimated 3.2 million people in the so-called "gig economy" according to Turbo Tax surveys, and that number is expected to rise to 7.6 million by 2020. Alot of people,especially if their work as an Uber driver is a part time or weekend job, might not know that the IRS considers them self employed and that they are responsible for paying taxes on their earnings. They may see forms  they have not seen before such as a 1099 The iRS gets a copy of that form too  so if you do not include your 1099 in your tax filing, and account for the additional taxes you owe, that is going to be a pretty obvious clue to the IRS to take a closer look at your return.
You lie about having health insurance. Health care is the newest issue. The Affordable Care Act started imposing penalties penalties on people without health insurance. In 2014, the penalty was fairly minor, but the amount is getting ratcheted up every year. The fee is calculated two different ways - as a percentage of your house hold income and per person. Healthcare.gov People who forgo insurance have to pay whichever of the two is higher. In 2015 that would be eithr 2% of your annual income, up to the averge annual premium of a "bronze" level plan through the federal echange or $325 per adult and half of that per kid to a maximum of $975. If you checked, "I had health insurance" but you really do not, it is easy to cross reference for the IRS to make
You claim to be a real estate professional when you are not. If you have a money losing rental property, the IRS considers that a "passive" loss, which means you can only deduct it against rental income .  The rules are different for real estate professinals, though: In that case rental income losses are considered "active" losses, which means they can be deducted against other income. So there is an incentative to try and make yourself a real estate professional. The catch is that in order to qualify as a real estate for purposes of this deduction, you  need to spend 750 hours a year working on your property. That means you must spend 14 hours a week. If you get a w-2 from an employer while trying to claim active real estate losses, that is likely to rais

​INCOME TAX AUDIT

Daniel Cullinane CPA

2500 Plaza 5 25th fl  Jersey City NJ 07311                                                          phone 732-516-1648  fax 732-516-9778

                 MBA TAXATION                                                                                                         

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