Tax Facts

• IRA and 401K contributions amounts have been increased for 2008. IRA’s increased to $5,000 per person, $6000 if 50+ 401K contributions increased to $15,500 per person, $20,500 if 50+
• For 2008, if you are in the 10% tax bracket, capital gains tax rate is 0%, instead of 10 and 15%. Limitations apply.
  

AUDIT TRIGGERS

• Deducting net loss from business on schedule C for more than 3 years.
• Any unreported income—The IRS matches all taxable income reported on a taxpayer’s return with the information it receives from employers and from 1099 forms issued by banks and brokerage firms.
• Improperly classifying independent contractors
  Check out Independent Contractor or Employee?
  at the IRS website to learn more.
• In-home office deductions—Any area in your home designated as office space must be used exclusively for business.
• Bartering—If you do any bartering, you must report the fair market value of the items or services for which you’ve traded.
• Taking abnormally large itemized deductions—If your itemized deductions exceed 35% of your adjusted gross income, that’s a red flag. Also, if, for example, you were to report $50,000 in income and show $20,000 in mortgage interest, the IRS might scrutinize your return more closely.
• Claiming mortgage interest expenses larger than your income.
• Claiming dependents with no social security number or the wrong number.
• Claiming losses from “tax shelters”—Any investment that generates losses can be a red flag.