Home-based tax deductions can be a "red flag" area for small businesses. If you legitimately work from home, you incur expenses related to your business. Additionally, some business owners take a portion of the depreciation of the house against the business. While this is not a big deduction in the scheme of things, the IRS seems to frequently audit these types of deductions to ensure it is legitimate.

In a BLR webinar titled "Tax Savings for Small Businesses: How to Maximize Valuable Deductions and Avoid IRS Overpayments," Brian C. Greenberg, CPA, outlined that the bottom line is to take these deductions but not call attention to them. In other words, you may be well served to not itemize the deductions on the form. It is strongly advised to not use the "home-based deductions" form because it is such a magnet for audits. Instead, take the expenses associated with the home-based business and put them on your taxes, just don't use that form.

Charity and goodwill also present problems for auditing. The biggest issue is documentation. For example, if you contribute more than $500 of clothing to Goodwill, then you have to have documentation to support how you did this. You cannot just say what you gave; you must have proof if you get audited.

Brian C. Greenberg, CPA, is the founder of Brian C. Greenberg & Associates, LLC, a New Jersey-based tax accounting firm. (www.greenbergcpa.com) With 30 years of experience as an accountant, Greenberg has developed a diversified background to service his clients’ needs. Greenberg has extensive media experience both nationally and locally, commentating for the Wall Street Journal Report, Fox Business News, Bloomberg News, Forbes TV, and local TV in Philadelphia with ABC, NBC, and Fox. He has appeared as an analyst on the economy, stock market, taxes, budget issues, school issues, and more.

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