Know the Red Flags that Trigger an IRS Audit

Here’s a fresh batch of tips and info to level up your life…

You Should Know

• Forget TurboTax. You can file your taxes for free at MyFreeTaxes.com or FreeTaxUSA.com. No income restrictions to use those services. If you earn less than $79,000, you can file for free at IRS Free File.

• Consumers spend 11.3% of their disposable income on food. It’s been 30 years since the percentage was that high, according to the most recent U.S. Agriculture Department data available.

• If you own a broad stock market index fund/ETF, the fastest growing component in your holdings is Nvidia, a company that makes chips for AI systems. Nvidia went from $1 to $2 trillion in value in less than half the time it took Apple and Microsoft. The company is now worth about the same as the entire Canadian economy.

How Likely Will You Face an IRS Audit? Beware These Red Flags

While the chances of an IRS audit are low (less than 1%, according to the IRS Data Book), you should know there are certain things that tip the scales in favor of an audit when the IRS reviews your tax filings.

There are certain groups that tend to get audited more. In general, the very rich (incomes above $500K) and the quite poor (incomes below $25K) get audited at higher-than-average rates. People who claim the Earned Income Tax Credit (EITC), which is a refundable tax credit for working families, get audited more often, because they may be underreporting wages and unfairly claiming the credit.

These are the red flags the IRS is looking for when deciding to audit a tax filer:

• Unreported income – If you earned money as an independent contractor you should have received a 1099-NEC. If you earned $600 in other ways from another entity (e.g. won a prize), you should have received a 1099-MISC. The payer is required to send a copy of these forms to both you and the IRS. Make sure you have matching paperwork.

• Claiming a home office deduction – You must meet specific requirements for this deduction, including using the space exclusively for business purposes.

• Most of your income is from self-employment – The IRS is wondering if you really are reporting all the money you're earning.

• Large deductions – Charitable deductions or unreimbursed employee expenses that are disproportionately large to your income raises an eyebrow at the IRS.

• Claiming excessive business expenses – The IRS wants to confirm if the expenses were directly related to the taxpayer's business.

• Large cash infusions – Banks are required to report to the IRS when customers deposit more than $10,000 in cash at once.

• Significant changes to your income – Big increases or decreases in income, especially if they're not consistent with your past tax filings or industry norms, smells fishy to the IRS.

When are you "in the clear" regarding a potential audit? The IRS usually focuses on returns from the previous three years in an audit. If the IRS discovers substantial omissions or errors in your return, they can extend the audit period to six years. There is no statute of limitations for audits in case of fraudulent returns or failure to file.

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Reduce Your Electricity Bill, Earn Money and Benefit the Planet with These Two Apps

Here are two innovative services that let you earn cash, save money on utilities, and reduce your environmental impact – OhmConnect and GridRewards.

These apps aim to change your power consuming habits by rewarding you with cash for using less electricity.

Partnering with local utilities, OhmConnect and GridRewards identify times when the power grid experiences high demand. They notify you via email or SMS text when there's a high energy demand event on the grid (typically during hot summer afternoons) and suggest ways to conserve electricity. During the high energy event, you earn rewards by reducing your electricity usage, such as adjusting your thermostat or unplugging unused appliances.

OhmConnect lets you earn “Watts,” which can be redeemed for cash via PayPal, prize drawings, and smart home upgrades. GridRewards sends a check at the end of the year. The service claims the average household can earn more than $100/year, and 97% of participants got paid last year.

Both services are currently available in select regions across the United States, such as California, Texas, and New York.

You Can Get a Zero Down Payment Mortgage with a Lower Rate. What’s the Catch?

This is a legit opportunity from the U.S. government. The U.S. Department of Agriculture (USDA) has a loan program to help people buy homes. No, you don’t have to be a farmer, but there are certain conditions.

USDA loans indeed require no down payment. Additionally, USDA loans offer competitive interest rates and flexible credit requirements. Technically, the USDA loans are issued by bank partners, with the USDA guaranteeing payment, if you default. On Jan. 1, 2024, the interest rate for mortgages guaranteed by the USDA was set at 5.125%, which is about 2% less than the current 30-year conventional mortgage rate.

Here’s the catch: the home you buy must be in a rural or suburban area and you must be a low- to moderate-income borrower.

This site can help you find areas that qualify for a USDA loan. Surprisingly, there is a lot of land that’s close to major urban areas that are eligible. Check out the areas that are close to New York City.

Regarding income limits, the borrower’s household income cannot exceed 115% of the median income in the county where their potential new house is located. You also need a credit score of at least 640 to qualify for streamlined processing.

Demystifying Coffee Refill Policies at Popular Chains

There’s plenty of confusion when it comes to the free refill policies at coffee stores. Here’s a rundown of the coffee refill policies of major chains:

Starbucks: You can get free refills of brewed coffee, iced coffee, and hot tea during the same visit if you meet the following conditions: 1) You purchase your initial drink in-store, 2) you use the Starbucks app or registered Starbucks card to make your purchase, 3) you remain in the same Starbucks location. As Starbucks owns all of its stores worldwide and doesn’t follow a franchise model, this free coffee refill policy is standard across all stores.

Dunkin: Dunkin' does not offer free refills on coffee across all locations, because the vast majority of Dunkin' stores are operated by independent franchisees. If you're a member of the DD Perks loyalty program, maybe you can get discounted refills on hot or iced coffee (again, dependent on the store). Some, but not all, Dunkin' locations offer a discounted refill for customers who bring their own reusable mug.

Peet’s Coffee: Some stores offer free refills for drip coffee, tea, cold brew, and iced tea if you purchase your drink in-store and consume it within the same visit. This policy isn't consistent across all locations.

Panera Bread: If you purchase a hot coffee, iced coffee, or hot tea in-store, you can get a free refill of the same beverage during the same visit. This applies to any size you choose.

McDonald's: Free refills are available at the discretion of individual franchise owners.