Beginning January 15, The IRS Free File program will offer free tax prep software for about 75% of American taxpayers.

In order to use this program, you must have an adjusted gross income of less than $62,000. That still means your effective income can be somewhere in the $65,000 to $70,000 range. (This program used to be open to anyone, but there was some fussing that the rich shouldn't be eligible for free tax prep, hence the cap.)

When you pick a company on the IRS website, you'll see that some specialize in only people of lower incomes. Most, however, will work with you up to the $62,000 cap. Some will also prepare your state tax return, if you live in a state that has a state income.

Here are some red flags likely to attract increased IRS audit attention

Had a great year last year and suddenly enjoyed a surge in income? You could have a target on your back for an IRS audit. While getting audited is no fun, you can survive! The key to remember is you need to have solid documentation to back up any claims you make about your overall financial picture, particularly your deductions.

 

1. You claim a home office deduction

You need to have a dedicated space in your home that is only used for business to take advantage of this deduction. Doing so lets you prorate some household expenses such as utility bills, homeowner's association fees and more on a fractional basis. You have to figure out exactly how much square footage is dedicated to your business in y our home vs. how much square footage you have in your home at large. Of course, this area is also ripe for abuse! You'll need to be able to prove the area you're claiming is separate and exclusive for business use.

2. You give a lot of money to charity

The IRS knows what others who make similar income to you tend to give, and they will question you if you're claiming too much. Again, the key is to have accurate and complete documentation to prove you've made the donation and to prove the value of the donation if it's non-monetary. But even then, there's something of a surprise factor because of how some donations play the car donation card. In general, one of the least scrutinized ways to make a donation is with good old fashioned pen and paper. As USA TODAY notes, "Gifts by check are hard to falsify."

Read more: Beware of this used car donation gotcha

3. You deduct unreimbursed business expenses

Unreimbursed business expenses are only deductible beyond two percent of your adjusted gross income, and most workers already get reimbursed by their employers for such out-of-pocket expenses. But if you don't get that reimbursement, things like dues, license fees, subscriptions to trade journals, tools and supplies and specialty uniforms are all legitimately deductible. The gray area here is when you get into deductions for non-allowables like commuting costs and everyday work clothes. Again, the IRS knows what is outside normal bounds based on your income and will question you if you're too far out of the norm.

Read more: 14 red flags that will get you audited by the IRS

For more money-saving advice, see our Money section.
 


 

 

Image of Clark Howard About the author: Clark Howard

Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. View More Articles

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