The Three Greatest IRS Sins

The number three sin is not to respond to an IRS notice. Ignoring IRS letters can only get you into more potential trouble. Number two is failure to report income. The IRS knows about most income from W-2s and 1099s so not reporting income will get you automatic penalties, interest, and taxes.
They can also audit your bank deposits and review your standard of living to look for unreported income. The number one greatest IRS sin is to not file a tax return. The IRS can impose a 25% penalty on unpaid taxes and the statute of limitations remains open forever until you file.

Medical Expenses Paid for Others

You can deduct medical expenses paid for those where you provide for over half of their support but who don't qualify as your dependents such as parents or adult children whose income exceeds $3,950. You can always deduct medical expenses paid for your spouse and dependents.

Legal Fees

When can you deduct legal fees on your individual return? It is a little tricky, because it all depends on what the fees are for. If the fees are closely related to your taxable income, you can deduct them. If the fees arise from personal activities, then they are not deductible. For example, fees to collect alimony in a divorce are deductible, but fees related to child support are nondeductible personal expenses. Some more examples of nondeductible legal fees are the cost of preparing wills, non-tax estate planning, fighting a driver's license suspension, and establishing an irrevocable trust. It is always a good idea to have an attorney allocate his bill between tax matters and non-tax matters in estate planning and divorce situations so you can support your deduction.

IRAs

You can make an IRA contribution of $5,500 for 2014 plus an additional $1,000 if you are at least age 50. You must have earned income or compensation up to the amount of your contribution except if you are a spouse with little or no income. The IRS lets you count your spouse's earned income for your contribution. You also can't make a regular IRA contribution if you are 70 and 1/2 or older. A Roth has the same contribution limits but no age restriction. If your income level is over $181,000
or you are covered by an employer retirement plan, then you may want to consider a nondeductible IRA. A Roth and a nondeductible IRA both are made with after tax income but they grow tax free. IRAs are a great tool for retirement.