If you take these 3 tax deductions you have a higher chance of being audited

Source: http://www.businessinsider.com/3-tax-deductions-raise-chance-of-audit-2015-12

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Getting audited is many taxpayers' worst nightmare, but that shouldn't stop you from taking advantage of the tax deductions you're legally entitled to take. You should just take care to make sure you have the documentation you need to back up your deduction if the IRS decides to take a closer look at your return.

Below, you'll learn about three tax deductions that often raise red flags from would-be auditors.

1. Home office deduction
Self-employed entrepreneurs often work out of their homes, and the tax laws provide for such businesses to deduct the legitimate expenses that are connected with their home-based business. If you meet the requirements for a portion of your home that's used regularly and exclusively for business use, and is your principal place of business, you can usually prorate your overall household expenses by the fraction of your home's total area that your business takes up. In addition, you can deduct in full expenses that are directly linked to your business and aren't shared throughout the remainder of your home for personal use.

Abuse of this provision has led to increased IRS scrutiny. The most important thing to remember is that you need to be able to document the separate area and its exclusive business use, so if your business takes up a large fraction of your overall property, you'll need to prepare to prove it. In addition, ensuring that all claimed expenses are business-related is important in maintaining your credibility during an audit.

2. Charitable deductions
Donations to charity are usually tax-deductible to those who itemize their deductions, and the IRS has paid increasing amounts of attention to charitable deductions in recent years. Gifts by check are hard to falsify, but claiming large amounts for donated items like cars or used clothing has been a frequent area of abuse among taxpayers.

In judging your charitable donations, the IRS will compare your deductions with those of taxpayers in a similar financial situation based on your tax return. If you're on the high side of average, the risk of an audit will increase, and it'll be more important for you to keep good records on what you gave, when you gave it, and how you determined the appropriate value of the property. Fail at any of those tasks, and you could be left unable to support your deduction to an IRS auditor.

3. Unreimbursed business expenses
Most of the time, employees get reimbursed by their employers for any business expenses they pay for themselves. As a result, the IRS looks carefully at unreimbursed business expenses, even though they're an itemized deduction and are only deductible to the extent that they exceed 2% of adjusted gross income.

Many items are potentially deductible, including dues and license fees, subscriptions to trade journals and publications related to your work, tools and supplies, and specialty uniforms. Yet the temptation among many taxpayers is to try to deduct additional items that are only somewhat connected to their jobs. Before taking this deduction, make sure the expenses you're seeking to claim are legitimately business-related, and be prepared to explain in an audit why your employer didn't reimburse you for them.

Finally, bear in mind that any deduction could lead to an audit if it's unusually large compared to what most people report on their tax returns. If you're entitled to a big deduction for any reason, make sure you have the records to prove it in case the IRS comes knocking.

Getting audited is no fun, but as long as you have the required documentation, you should be able to stand up to IRS scrutiny with your deductions intact. Keeping good tax records with these three deductions in particular is a smart move that will keep you from paying extra tax after an audit.

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The Texas professor who lived in a dumpster started a company that's building 208-square-foot, movable apartments

Source: http://www.businessinsider.com/texas-professor-is-building-apodments-2015-12

There’s a lot to like about Kasita, a micro-modern-modular apartment building coming up in the heart of Texas. The units are 208 square feet in size: teeny-tiny, but these days, less is more. Especially in Austin, where the population as a whole is booming but where families with children are leaving the urban core in droves.

To help singles squeeze their lives into such small spaces, Kasita boasts tons of interior-design bells and whistles, from modular “tile” shelving to various networked-home features.

And then there’s Professor Dumpster, aka Jeff Wilson, the former dean of Huston-Tillotson University who once made his home in a 33-square-foot dumpster as a teaching exercise. He’s the brain behind Kasita, and he’s assembled a diverse team of designers and executives to build his dream in Austin and at least nine other cities. Kasita has raised at least $645,000 in private investment so far (and more is promised).

But Kasita also raises two questions. And on these points, the project risks running awry.

The first concern is, unfortunately, key to the whole Kasita concept: The prefab housing units are all ‘apodments.’ They can be moved from one city to another, presuming there is a vacancy in the destination Kasita. Think of them as modular storage drawers that you might buy from the Container Store (but much cooler looking).

Kasita

It’s a solution in search of a problem. Sure, moving’s a pain in the ass. The apodment doesn’t get you out of moving, though. It just makes the process that much more difficult. A resident who lives on the third floor of Kasita is going to need a crane or a truck to get her pod down and on to the truck that will carry the pod to its next location. It’s bound to be less expensive to hire two movers for an hour—how much can it cost to pack up a 200-square-foot apartment?—or do it the old-fashioned way by paying friends for their labor with beer and pizza.

“Request a move across town or across the country with a tap on your phone,” the site reads. But who would ever do this? The tech triumphalism is off-putting. Moving is stressful because it’s important. It’s supposed to be stressful. And broadly speaking, permanent housing isn’t something that begs for branding across cities, like hotel chains or Lyft.

The second issue is the cost. Dumpster/Wilson has said that the units will rent for $600. The company has two lots in downtown Austin, where rents go for much more. Rents downtown range from around $900 to more than $2,000. Depending on where the Kasita lots are located, the median rental housing cost might be more than three times the asking rate for a Kasita unit. (I’ve emailed the Kasita team to ask about the location and will update when I get answers back.)

Kasita

There’s a popular misconception that modular housing necessarily means cheaper housing. The high costs of housing aren’t driven by the manufacture of homes. They’re driven by the high price of land in places like Austin, one of the finest cities on this planet (and my former home). In a city where Millennial residents are allegedly holing up in “stealth dorms” in order to escape high rents, the queue for a $600 downtown apartment—even an utterly tiny one—would run like the endless line to Franklin’s on a sunny Saturday during SXSW. The same goes for Brooklyn, Los Angeles, and other cities where Kasita plans to expand. After all, here’s what $600 gets you in Bushwick.

“Through partnerships with local entities, Kasita will rent units at about half the market rate of a studio apartment,” the website reads. Maybe that will work. Call me skeptical.

There is a solution to high rents in Austin, though—and it’s staring us right in the face: The rendering of Kasita depicts in the background various types of housing in the Live Music Capital of the World, including tall residential towers, several of which have gone up in the city in recent years. More buildings like these, with a greater variety of unit sizes and formats—and, crucially, the zoning that allows for high-density residential construction—is just what the doctor ordered.

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