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Audit triggers

(Sacramento Bee) -- A tax audit can be a fearsome prospect.

There's no sure way to avoid one, but H&R Block has identified a number of issues that can prompt the IRS to look more closely at a return:

Home office deductions. The IRS often scrutinizes these deductions because individuals tend to make arithmetic errors when figuring them and because many taxpayers who claim them are not entitled to do so. Check out the rules for office deductions at the IRS Web site,

Self-employment expenses. Claims for meal, entertainment and travel expense deductions can increase your chances of being audited. Remember to retain copies of receipts and record the purpose of each expenditure, mileage and so on.

Itemized deductions. The IRS looks at the relationship between income and deductions. The greater the percentage of charitable deductions, for example, the greater the chance the IRS will take a second look.

This doesn't mean you should avoid using such deductions. Just make sure they apply to you, keep good records and double-check your math.

If you can't file on time, the IRS may waive failure-to-file and failure-to-pay penalties if you can show reasonable cause for not doing so. What's reasonable cause? According to Block's 2001 Income Tax Guide, it may be severe illness, death of a spouse or immediate family member or other issues beyond your control.

If your tax liability is so large it is unlikely you will ever be able to pay in full, consider making an offer in compromise to the IRS.

As always, there's a form to fill out, Form 656, to be submitted to the IRS office in your area.

Check out your tax preparer If you use a tax preparer, make sure the person is qualified.

In California, professional tax preparers must be registered by the California Tax Education Council or have credentials from the California Board of Accountancy (certified public accountants), the State Bar Association (attorneys) or the IRS (enrolled agents.) In some cases, the tax preparer can be an employee of a professional designee.

CTEC, which sets education standards for tax preparers, has found cases where taxpayers made large overpayments thanks to unregistered (and uneducated) tax preparers.

One couple paid more than $8,000 in unnecessary taxes because their preparer did not know about lump sum retirement tax breaks.

Another taxpayer was told, incorrectly, that she could not claim her newborn as a dependent because the baby was born in the latter half of the tax year.

Free tax help available Need additional help?

Again this year, squads of tax preparers are volunteering their time to complete tax returns for free as part of the IRS Volunteer Income Tax Assistance and the Tax Counseling for the Elderly programs.

To find out where volunteers are in your zip code, call the IRS at (800) 829-1040. Put your telephone on speaker and have something to read, because the telephone wait lengthens as the tax deadline draws near.

(c) 2001 Sacramento Bee

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