Tax deductions are a common and financially advantageous method individuals use to lower their tax liability, but certain tax breaks may attract the attention of the IRS more so than others. This is largely because certain deductions have more wiggle room in the numbers or stricter rules and stipulations than others and the tax agency wants to make sure those who apply truly qualify. Keep in mind that these deductions are legitimate and individuals who qualify for them should apply. However, it's important to keep all the relevant supporting documents organized and work with a tax preparer
to make sure the tax forms were completed correctly in the event that the IRS requests paperwork.
The first deduction that often attracts attention is a home office deduction. This tax break allows self-employed workers and some employees to deduct some of the costs, ranging from equipment, rent and utilities, from working out a home office, which is their sole and principal place of business. There are a number of parameters workers must fall into in order to qualify for this benefit, and it's important for individuals to make sure they satisfy all, not just some, of the requirements. Because the eligibility rules and the deduction calculations that accompany this deduction are specific, working with a tax professional to claim this benefit is advised.
In addition to a home office deduction, workers should keep all receipts, invoices and billing information related to meals, travel and entertainment expenses associated with their business. In order to steer clear of any problems that could arise from claiming this benefit, keep all financial information involved in these business transactions, as well as a detailed list of the time, place, number of people, business purpose and the nature of the business conversation, according to Kiplinger.com.
Lastly, being generous and donating to charity is an effective way of reducing you tax liability - but individuals should make sure they have the necessary documentation to support the write off. Although the documentation rules vary based on the amount and type of contribution, always keep cancelled checks and ask for a receipt cataloging the details of the charitable donation from the organization. In addition, make sure the organization is considered qualified by the IRS before claiming it on income tax forms.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.
About Liberty Tax Service
Liberty Tax Service is the fastest -growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service. Liberty Tax Service
is the only tax franchise on the Forbes “Top 20 Franchises to Start,”
and ranks #1 of the tax franchises on the Entrepreneur “Franchise 500.” Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.