One of the easiest ways to get audited is by simply not providing all the correct documentation. When doing your taxes, it can be easy to miss a step or forget to include a few things. Unfortunately, this looks like evasion to the IRS, so do everything you can to keep all your tax documents together before tax season. That way you can make sure that all of your returns are accurate before you file them.
Keep Business Separate
It’s easy to get carried away when buying stuff for “the office”. However, make sure that when you are buying anything for your business that it is a business expense allowed by the IRS. Additionally, too many write-offs for your business that seem suspicious are a big red flag for the IRS, so only write-off items that clearly serve a business function.
Check Your Income
Make sure the income you put on your return matches the income number on your income forms exactly. While this does not always make for an audit, it only takes a few things to raise suspicion. Listing an incorrect income is of the easiest ways to get audited, but can easily be avoided by double-checking your return before you file it.
Remember the Extras
It is imperative to include any and all cash gifts, gambling winnings, or contest prizes you received during the tax year. One famous case of this mistake was the winner of the first survivor, Richard Hatch, who “forgot” to claim his million dollar prize and eventually went to jail for tax evasion.
Things like round numbers and unrealistic charity deductions are a dead give away. Always be honest on your return, even if it means you will owe the IRS money. If audited and found in error, then the IRS will assess interest and penalties on top of the original tax liability.
Check With a Professional
If you are not completely sure your information is accurate or correct, then you should check with a tax specialist. Even if you are used to doing your taxes on your own, making a big mistake on your return and getting audited is not worth it. Hiring a professional may cost a little more, but at least you can rest assure that your return was prepared correctly.
The more big and expensive items you buy, the more likely you are to make a mistake on your taxes and get audited. To avoid accidentally missing a large ticket item on your tax return, try to buy your large items in moderation and keep records of all purchases.
Even if you do keep good records, hire a professional, and spend frugally, you can still be audited. The only way to truly avoid this is to follow all of the above steps, and then meticulously go over all your information and check for mistakes. When it comes to tax filing, mistakes are easy to make, and taking the extra ten minutes to review your return can save you a lot of time in the future.