Wednesday, March 17, 2010

Can tithing trigger an IRS audit?

Apparently so...

5 tax moves that may trigger an audit

by Kelly Phillips Erb

Disproportionately high charitable deductions. Charitable deductions are one of the most common deductions claimed on a personal income tax return. In fact, more than 90% of taxpayers who opt to itemize claim charitable deductions.

But just because everyone takes the deduction doesn't mean the IRS won't take a second look. The IRS will review returns that include charitable donations that appear disproportionately high as a percentage of income.

What qualifies as high? Taxpayers who claim the charitable deduction donate, on average, about 3% of their income. Anything above that may start raising some eyebrows.

So if you start climbing too far above that number, you might turn some heads. Does that mean taxpayers who donate more are automatically in trouble? Of course not. Many taxpayers routinely donate higher percentages due to religious or other charitable reasons. Just be sure and document your donations properly -- and make sure the values of non-cash donations make sense.

No comments: