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Tax Season Shenanigans? 10 Things to NEVER Say to Your Tax Preparer
Let’s face it, tax season can be a headache. And for some, the mere mention of the word “audit” sends shivers down their spine.
Our intrepid reporter, who’s been through the audit wringer three times (and somehow came out ahead!), has some sage advice. He learned the hard way that “aspirational bookkeeping” just leads to stress.
Now, with the help of a pro, he’s sharing 10 things you should absolutely avoid saying to your tax preparer if you want to steer clear of Uncle Sam’s watchful eye.
1. “I didn’t keep the receipts.”
Ah, the classic. Claiming a nice round $5,000 for travel or supplies without a single receipt?
That’s a red flag waving in the wind. Expenses need proof, and telling your preparer you’re just guessing puts them in a tough spot.
Before your appointment, dig through those bank and credit card statements and reconstruct what you can. Give your pro something solid to work with!
2. “That was 100% for business.”
While we all strive for maximum deductions, claiming 100% business use for a vehicle or phone is about as rare as a unicorn sighting. Perfection percentages scream “audit bait.”
Be honest about personal use. A realistic allocation is much safer than a claim that sounds too good to be true.
3. “I run it for fun, but it loses money.”
If your “business” consistently operates in the red and you describe it as a passion project, you’ve essentially slapped a “hobby” label on it. And hobby losses are treated differently than business losses. If you genuinely intend for your hobby to become a business, document your profit motive: marketing efforts, separate bank accounts, and growth plans are key.
4. “Can we just backdate that contribution?”
Whoa there! Asking to backdate paperwork is a major ethical no-no.
Most preparers will flat-out refuse and might even show you the door. If you missed a deadline, ask about legitimate options.
There might be legal remedies that don’t involve you or your preparer committing tax fraud.
5. “I made a tiny bit of cash on the side.”
There’s no such thing as “off the books” income once it hits your bank account or funds your lifestyle. Discrepancies between your reported income and your spending habits can raise serious questions.
Report all income, and let your preparer help you deduct legitimate related expenses. Don’t guess or overclaim!
6. “Girl Scout cookies count as a charitable donation, right?”
While supporting the Girl Scouts is commendable, buying a box of Thin Mints doesn’t qualify as a tax-deductible charitable donation. Even if a portion of the organization’s earnings goes to non-profits, your purchase itself isn’t a write-off.
Keep records and written acknowledgments for genuine charitable contributions. When it comes to taxes, generosity is best when backed by paper trails.
7. “My home office has a bed.”
The home office deduction requires exclusive and regular use. If your “office” doubles as a guest room or a spot for your Peloton (even if it’s just a clothes drying rack!), it’s not a tax-deductible home office.
If it’s not a clearly defined workspace used solely for business, skip the deduction. Or, you know, move out the air mattress and exercise bike.
8. “I don’t have a mileage log.”
Mileage deductions demand records. While you might be able to recreate a log after the fact, it’s far weaker than contemporaneous tracking.
Use an app or a simple spreadsheet to log your trips as you go. And for the umpteenth time: no, your regular commute to and from work is not deductible.
9. “Itemize all the way!”
Our reporter admits to aggressively itemizing in his early audit years despite a modest income. Sometimes itemizing makes sense, but often, the standard deduction is simply the better option. Run both scenarios and don’t force itemization just to “milk” a return.
10. “We had some unusual expenses.”
A few years back, our reporter and his spouse found themselves audited, partly due to maxed-out retirement contributions and unusually high medical expenses. While they came out clean, these “red flags” fueled the audit.
If you have any unusual circumstances or significant expenses, give your tax preparer a heads-up and provide all pertinent documentation. A professional’s seal of approval on an “exotic” return might just carry more weight with Uncle Sam.
The Bottom Line
An audit isn’t always a disaster; sometimes, you even come out ahead! But the stress, paperwork, and uncertainty are rarely worth it.
The safest route is honest, organized filing. Provide your preparer with clean records, realistic claims, and full transparency, and let them do their job.
Want to boost your financial health? Here are some quick tips:
- Increase your income: Explore side hustles or other legitimate ways to keep more cash in your wallet.
- Grow what you have: Time and compound interest are your friends!
Understand your financial standing and consider working with a professional for long-term wealth building.
- Take advantage of opportunities: Maximize senior benefits, find the best car insurance rates, and avoid those money-wasting traps that silently drain your bank account.