- quote -

So? Where did that money come from?

- quote -

If you drew down savings to pay living expenses, I don't see
the problem.

If you paid living expenses with a lot of cash income you
didn't report, _then_ you have a problem.

Seth

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Thanks Dennis,
I have all those receipts and forms such as 1098. But I
don't know how to explain living cost after they see my
mortgage payment and income if they decide to question me
about living expense.

By calculating both Traditional and Roth, I would only save
500-600 Tax by having full deduction. That's roughly saving
of 15%. Do you think it's worth it?

Thanks

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Thanks for all of your explanation and help.
I read PUB 590 and found out I am eligible to deduct full
$4000 even though I am covered under Employee Retirement
Plan. (because my modified AGI was still under 50,000)

So "Why am I worry about if I have supporting documents?"

Yes, I do have legitimate documents to support my deduction,
but what if they question me about my living expense.
Mortgage payment and property tax are roughly 40,000 in
2005. Since my AGI is around 43000, that only leaves 3000
for living expense. Sorry I should have included the total
mortgage payment.

That's why I am worry.

Thanks

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<polaris80[at]gmail.com> wrote:

- quote -

You are entitled to claim each deduction you listed. I
wouldn't not claim the interest and taxes. You could leave
out the job expenses if you wanted to - this is a place you
would have to have receipts whereas the others can be
supported with just a couple of documents.

In this situation, I would do the Roth IRA rather than the
regular.

Hope this helps,

Wayne Rivers, CPA

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polaris80[at]gmail.com wrote:

- quote -

The best way to deal with the possibilty of an audit is to
have documentary evidence that supports all your itemized
deductions. That way, if you are audited, there should be
zero adjustment.

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polaris80[at]gmail.com wrote:

- quote -

If your deductions are legitimate and you have
substantiation you should not concern yourself with being
audited. File your return. Converting an IRA to a Roth IRA
is a good idea when a t/p either has no tax liability or is
in a very low tax bracket.

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As long as you have documentation to verify your Schedule A
deductions, don't worry about getting audited.

Rudy
www.LizcanoTaxServicesLLC.com

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Don't be afraid to take any deductions that are legitimate,
especially if you have receipts to back up the expenses.
Presumably the taxes you paid (state/local income tax
withheld, property tax) can easily be substantiated, and
mortgage interest was reported to you on a 1098, etc. So
what if you are audited, if you can prove your deductions,
who cares?

Regarding the IRA, figure your taxes both ways, with a
traditional and with a Roth contribution. If the benefit
from deducting the traditional IRA is not that great
(because, e.g., you are only in the 10% tax bracket), you
might want to make it a Roth IRA contribution. That will be
up to you to decide.

Dennis

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polaris80[at]gmail.com wrote:

- quote -

If your deductions are legitimate and well documented, why
are you worried about avoiding an audit?

--
================================================== ======================
Ian Pilcher i.pilcher[at]comcast.net
================================================== ======================

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<polaris80[at]gmail.com> wrote:

- quote -

I'm going to assume you're covered by a retirement plan. If
I'm correct, double check to make sure you're able to deduct
your IRA contribution. See Publication 590.

- quote -

If you're not getting any tax benefit from the traditional
IRA contribution, or a small tax benefit, consider a Roth
instead. I like the long-range tax-free earnings aspect of
it.

- quote -

Huh?

- quote -

Oh, so that's what this is about. So what if they audit
you? The experience doesn't come anywhere close to Sister
Mary Severe approaching with a waving ruler telling you to
hold your hands out.

Yours are perfectly straightforward deductions, easily
proved. One year I ran into the 50% of AGI limit on
charitable contributions, let alone anything else on the
return, and the IRS didn't blink an eye.

The best audit defense is an accurate return that you can
back up with proof.

--
Phil Marti
Clarksburg, MD

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polaris80[at]gmail.com wrote:

- quote -

Your IRA contribution is NOT an itemized deduction. It is
"above the line" and reported on page 1 of the 1040 form.

- quote -

All legitimate, although somewhat above federal averages for
your income level.

- quote -

These are subject to the 2% of AGI limitations, but
otherwise acceptable if legitimate out-of-pocket expenses.
Did you request reimbursement from your employer?

- quote -

Make sure that you have documentation and backup data for
the claimed deductions, otherwise claim whatever is
legitimate.

- quote -

Whether you do or not, shouldn't increase your audit risk.
As I said above, it does not show up on your Schedule A.

- quote -

Your choice.

- quote -

What are you afraid of? All they can do is ask you to
substantiate the deductions with your backup information.
Which you can do, right?

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I have a situation where I may have too HIGH itemized
deduction. After $4000 contribution to IRA, my AGI becomes
around $43,000. Then I have $11xxx for taxes I paid for
State & Property, and $16000 Interest Payment.

I have roughly $2-3000 job expenses which I've been claimed.
Basically I can claim $30,000 for the itemized deductions.

I am not a self-business owner. I work for public school
district. What should I do with high itemized deduction?

Couple thing I can do..

1) Contribute to Roth IRA or Not Contribute at all. (I
didn't mail out the check yet for 2005)

2) Take $0 deduction on job expense or at least put 2% so it
follows consistency from previous year.

Even if I do this, it's still over 50% of AGI.
Any other way to avoid an Audit?

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