IRS Penalties Rise if You Can’t Prove Your Claimed Deductions
The Internal Revenue Service has made it publicly clear that you must show an appropriate paper trail as proof when you claim deductions. There are taxpayers who claim home deductions and medical costs on their tax returns but don’t provide any proof. As far as the Internal Revenue Service is concerned, if there is no proof, it doesn’t exist. Aside from not providing evidence of your deductions, filing late will make the situation worse. Not only will you have rejected deductions, but you will also have a late filing penalty.
Certain deductions are valid such as the cost of medical treatment for the taxpayer and dependents. You may only deduct if the medical costs are more than seventy five percent of your amended gross earnings. The medical costs must not be remunerated by insurance. House mortgage or ‘eligible residence interest’ can be deducted but must not be more than $100,000. Interest is paid during the acquisition of a property.
The kind of information the Internal Revenue Service expects as part of the proof for claimed deductions is dates of payments, amounts of payments, invoices, names and addresses. If it is not included with your tax return it is likely the Internal Revenue Service will disallow those deductions. If you want to make sure you get the deductions entitled to you, you must provide proof in writing. This will also prevent unnecessary delays and appeals on your part but it will give you extra interest, fees and perhaps legal fees.
The weak economy is another reason to urge taxpayers to make sure they get as many tax reductions as possible. It is illegal to claim for false deductions. However, as long as you can show a paper trail of evidence for legitimate claims for deductions you have every chance of getting the Internal Revenue Service to cooperate with your request.
