In our last post we discussed the fact that excessive deductions can lay the foundation for a civil tax controversy in which the IRS will scrutinize a portion or all of a Miami taxpayer's filings. It is important to make sure that deductions are made only when taxpayer has the proper supporting documents. Taxpayers who take deductions without the necessary documentation may be liable for fines, penalties or criminal prosecution.
Contact an experienced Miami tax law attorney if the IRS initiates an audit based on deductions or any other reason. It is also important to remember that the IRS has no problem with individuals taking deductions but that it is important to make sure that your deductions can withstand an audit.
The IRS recently issued the following three tips for Miami taxpayers to reduce their tax liability:
1) Evaluate your stocks. It might be time for a last minute stock sale. Generally losses on stock sales are deductable up to the amount of a taxpayer's gains from stock that year. If the losses exceed the gains then a taxpayer can take up to an additional $3,000 deduction from other income. Losses above that amount can be carried forward to other tax years.
2) Contribute to retirement accounts. Remember that elective deferrals must be made by Dec. 31, but IRA contributions can be made up to April 17, 2011 and still count toward 2011 taxes.
3) Install green or energy-efficient home improvements. The installation of energy efficient improvements such as insulation or water heaters can result in $500 in tax savings and the Residential Energy Efficient Property Credit is also available to some homeowners who install qualifying solar, wind, geothermal or heat pump technology.
Source: Internal Revenue Service, "Six Year-End Tips to Reduce 2011 Taxes," Special Edition Tax Tip 2011-09, Dec. 21, 2011