Deduction Dilemmas

Physician's Money Digest, May 15 2003, Volume 10, Issue 9

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 your 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 4 common income tax deductions: