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Itemize Deductions

26 / 10 / 2015 by Greg Freyman, CPA in Personal Tax

Does Itemizing Increase My Audit Risk?

Itemizing deductions in itself does not increase the chances of being audited. If we reference the latest IRS statistics, the taxpayer’s income is more of a factor than whether or not they itemized. Specifically:

  • Most basic tax returns with less than $200,000 in income and without any business or investment income have a 0.3% chance of being audited, or 3 out of every 1,000 tax returns are audited.
  • If the taxpayer’s income is at least $200,000 for the same, the rate is 2.2%, or slightly in excess of 2 out of every 100.
  • Over a $1M in income, and the rate is 7.5%.

That being said, if the taxpayer has significant itemized miscellaneous expenses in relation to their income, then that can certainly raise a red flag.

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20 / 10 / 2015 by Greg Freyman, CPA in Personal Tax

Should I Itemize Or Claim The Standard Deduction?

The obvious answer is that if your itemized expenses exceed the standard deduction, you should itemize. That being said, if you don’t have the actual receipts and supporting documentation to justify claiming those expenses, then you run the risk of losing those deductions as a result of an audit, which can be costly from an interest and penalties perspective. Not to mention, you’ll likely need to hire a tax professional to assist you with IRS correspondences.

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