Warning to those who file Tax Deductions

The IRS reassessed a list this year they call “the dirty dozen”. IRS this year has specifically warned people about what it calls padding of tax deductions and added that to their dirty dozen list this year. Now to be fair, the IRS agrees that the majority of taxpayers file honest and accurate tax returns each year. Yet there are those that falsely claiming deductions, expenses or credits on tax returns. One’s that IRS especially watches include overstating deductions such as charitable contributions, padding business expenses, or including tax credits like the Earned Income Tax Credit and the Child Tax Credit. Significant penalties may apply for taxpayers who file incorrect returns including:

• 20 percent of the disallowed amount for filing an erroneous claim for a refund or credit.
• $5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax reported is substantially incorrect.
• In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75 percent of the amount owed if the underpayment on the return resulted from tax fraud.

The IRS also reminds taxpayers that they could even be subject to criminal prosecution. The range of potential offenses includes:

• Tax evasion;
• Willful failure to file a return, supply information, or pay any tax due;
• Fraud and false statements;
• Preparing and filing a fraudulent return; or
• Identity theft.

Here is the best, most way to prevent any of this happening to you. Talk to licensed CPA firm with years of experience on navigating tricky IRS waters. They are bound by the state to file correct, non-fraudulent returns and handle cases. In this case, it can be tempting to claim deductions or credits you don’t have. If you turn to a CPA company with years of experience, you save yourself from that temptation and file the best return possible.