< Back To Article List

Standing Out In The Crowd: IRS Statistics

Many people like to stand out in a crowd, to have something a little different that’s out of the ordinary. Whether it’s the car they drive, a certain attire, or even a favorite hobby – most people like to feel special – to have or do something unique that is just a little different from everyone else. Yet when it comes to IRS, there seems to be a consensus about just being a faceless part of the crowd.

I cannot count the times I have heard clients express concerns about calling attention to their tax return. “We will just leave it off if you think it will throw up a red flag.” Boy, I would like to think the Service has run out of “Red Flags” by now, but the truth is they probably have not. So what actually throws up a Red Flag?

Well, there are a few things that come to mind; I’ll share a couple. These are preparation mistakes that likely come from an inexperienced tax return preparer. If you think about it, all of us would probably know better.

  1. Claiming a loss on the sale of your principal residence – Maybe not such an obvious oversight, but consider the fact that gains up to $500,000 can be excluded from income for a married couple. Since most sellers are not required to pay taxes on their gain, you might expect that losses are not allowed – the old theory of just being too much of a good thing.
  2. The value on items donated to charity is too high – More taxpayers probably struggle over this issue than any other. While there are a few exceptions, generally the value claimed on your tax return should not be more than what you paid for an item, and usually it should be quite a bit less. Let’s face it – that computer that you just donated to your kid’s school is not worth more than you paid for it 3 years ago. And even if it was, your deduction is typically  limited to what it cost you. (Some exceptions)

While deduction amounts outside of the average will not necessarily throw up the dreaded Red Flag, you might like to know the average amount deducted on tax returns filed across the country.

            2007 Average Deductions Claimed Based on Adjusted Gross Income
                    Adjusted Gross Income in Thousands of Dollars
AGI           $0-15  $15-30  $30-50  $50-100  $100-200  $200-250  $250 & up
               -----  ------  ------  -------  --------  --------  ---------
Medical       7,402   6,849   6,040   6,690     9,922    22,810     32,813
Taxes paid    2,777   2,959   3,623   5,822    10,370    17,013     49,370
State &
local tax*      760   1,006   1,606   3,053     6,015    10,868     39,454
taxes only    1,204   1,211   1,836   3,428     6,760    12,208     45,945
Gen. sales
tax only        506     741   1,049   1,631     2,397     3,297      4,727
Contrib       1,387   1,931   2,127   2,612     3,790     5,733     23,817
Interest      9,850   9,102   9,262  10,558    13,766    18,030     28,110
Total itemized (after
limitation)  15,431  15,062  16,013  19,937    28,380    39,542     91,046
* State and local taxes are the total of both income taxes and general sales taxes.

These averages were computed from IRS’s latest available statistics.

DISCLAIMER: Information provided by Hoyle, CPA, PLLC on social media, on its website, and related free information distributed via email is intended for reference only. The information is designed solely to provide guidance and is not intended to be a substitute for someone seeking personalized professional advice based on specific factual situations. Responding to such inquiries does NOT create a professional relationship between Hoyle, CPA, PLLC and participant and should not be interpreted as such. Although Hoyle, CPA, PLLC has made every reasonable effort to ensure that the information provided is accurate, Hoyle, CPA, PLLC, and its shareholders, managers, and staff, make no warranties, expressed or implied, on the information provided. The participant accepts the information as is and assumes all responsibility for the use of such information.