11 tax audit red flags

Deducting a home office can always be a red flag, because many taxpayers consider any part of the house where they do work to be an office -- even if they do other things, like watch TV or cook, in that same area.

To qualify for a home office deduction, you must use the office exclusively for work and it must be your primary place of business -- not one of several offices. If this is the case, make sure you document expenses like housekeeping, alarm systems and other items you plan to claim -- down to the share of utilities you use in just the office itself -- in case the IRS decides to check it out.

And even if you think it's legitimate, don't go overboard. Georgetown's Cooke had a client, for example, who ran a business breeding and raising high-end cats. Since the taxpayer had cats sprawled out in every room of the house, she thought it would be okay to deduct 90% of her house as a home office. While Cooke agreed that the business took up a significant portion of the client's home, he advised lowering the percentage to about 40% so that it was less likely to raise red flags.

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