Deduction Dilemmas

Physician's Money Digest, April30 2004, Volume 11, Issue 8

Tax deductions that exceed what the IRS considers average can increase the likelihood of a tax return audit, according to the National Taxpayers Union. If your deductions are high compared with those of others in your income bracket, you may draw audit attention. This is a serious concern, because when the IRS discovers above-average deductions, it could examine an entire tax return more closely, as well as returns from previous years. Claiming average deductions won't make your return audit-proof, but it may reduce your risk. As always, if your deductions based on adjusted gross income (AGI), are high, you can retain them as long as your documentation is first-rate. Also, if your deductions fall below average, it may be a good time to review your return with a tax professional. You may be overlooking legitimate deductions. The following IRS statistics show the average dollar amount for four common income tax deductions: