High deductions relative to income, but for good reason?
I am finishing up my preliminary taxes for 2007. My wife has been unemployed most of the year, and thus our AGI is about half of what it was in 2006. In addition, our itemized deductions are extremely high relative to our income as a result. Our itemized deductions simply consist of our mortgage interest, property taxes and a home equity of line of credit. This should not trigger an audit, should it? Regardless of our employment status we have to pay the taxes & interest.
One can easily look at the return and see my wife was out of work for most of the year (unemployment compensation, then a job which pays about 40% of what she made the last year she worked.).
Thanks in advance for your advice.
You have nothing to worry about. Your wages are reported to IRS by your employer on Form W-2, the mortgage interest is reported to IRS on Form 1098 by the entity you paid the interest to. This is not the kind of return the IRS would select for audit, and even if they did, your deductions are legitimate. IRS audits less than 1% of tax returns. Yours will not be one of them.
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