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Avoid Overstating Business Deductions

The IRS annually releases a “Dirty Dozen” list of possible tax scams currently going on. One they recently just highlighted was overstating business deductions for the purpose of decreasing the amount of tax due. You want to avoid doing this because of the simple fact that is illegal. There are also penalties associated with this fraud:

• 20% of the disallowed amount for filing an erroneous claim for a refund or credit.
• $5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” (the return clearly shows the tax reported is substantially incorrect).
• Along with the full amount of tax owed, a taxpayer could be assessed a penalty of 75% of the amount owed if fraud is deemed on the return.
• Criminal prosecution and brought to trial is also a possibility with a fraudulent return.

Please be sure to keep accurate records, programs such as Quickbooks or excel are great tools to keep track of your expenses.

Please consult your tax advisor on all the above information.

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