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IRS Cracks Down On Padding Tax Deductions

IRS Cracks Down On Padding Tax Deductions
Some people search high and low for tax deductions. But making them up--or artificially enhancing the ones you have--isn't exactly keeping to the straight and narrow. Indeed, the IRS this year has specifically warned people about what it calls padding of deductions. The IRS warns to avoid the temptation to falsely inflate deductions or expenses. In fact, the IRS includes the issue on its 2017 Dirty Dozen list of tax scams. In the IRS's words, the majority of taxpayers file honest and accurate tax returns each year.

However, each year, as the IRS puts it, some people “fudge” their information. Falsely claiming deductions, expenses or credits on tax returns is serious, regardless of their type. The IRS notes that it happens with overstating deductions such as charitable contributions, padding business expenses, or including tax credits to which you are not entitled. Two big ones to watch? The Earned Income Tax Credit and the Child Tax Credit.

The IRS is also putting the public on notice that IRS automated systems are increasingly efficient, and they generate most IRS audits. The IRS can normally audit returns filed within the last three years. But not only three years are at risk. The IRS can add additional years for big errors or fraud. If being audited is not bad enough, the IRS warns about the penalties or worse.

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