An audit is simply the IRS double-checking your numbers to make sure you don’t have any discrepancies in your return. If you’re telling the truth, and the whole truth, you needn’t worry.
However, people who are consciously cheating the system do have reason to be concerned.
Why the IRS audits people
The IRS conducts audits to minimize the “tax gap,” or the difference between what the IRS is owed and what the IRS actually receives. Sometimes audits are random, but the IRS often selects taxpayers based on suspicious activity.
What gets the IRS’s attention
We’re against subterfuge. But we’re also against paying more than you owe. As you walk the line this tax season, here are seven of the biggest red flags likely to land you in the audit hot seat.
1. MAKING MATH ERRORS
When the IRS starts investigating, “oops” isn’t going to cut it. Don’t make mistakes. This applies to everyone who must file taxes. Don’t accidentally write a 3 instead of an 8. Don’t get distracted and forget to include that final zero. Mistakes happen, but make sure you double- and triple-check your numbers if you’re doing your own taxes. You’ll be hit with fines regardless of whether your mistake was intentional. If your math is a little shaky, using good tax preparation software or a registered tax prepares in your area can help you avoid unfortunate errors. I will NOT and I repeat myself Do NOT try to do your taxes yourself if you don't know what are you doing. just because, you saw an add commercial, that says, "do your taxes your self and save money using our website"
When the IRS starts investigating, “oops” isn’t going to cut it. Don’t make mistakes. This applies to everyone who must file taxes. Don’t accidentally write a 3 instead of an 8. Don’t get distracted and forget to include that final zero. Mistakes happen, but make sure you double- and triple-check your numbers if you’re doing your own taxes. You’ll be hit with fines regardless of whether your mistake was intentional. If your math is a little shaky, using good tax preparation software or a registered tax prepares in your area can help you avoid unfortunate errors. I will NOT and I repeat myself Do NOT try to do your taxes yourself if you don't know what are you doing. just because, you saw an add commercial, that says, "do your taxes your self and save money using our website"
2. FAILING TO REPORT SOME INCOME
Easy way to score an audit? Don’t report part of your income. Those lottery winnings or unemployment checks received, they will come afloat sooner than later, and the same goes for cash job made, if the business owner, who you perform the job, decide to give you a 1099-misc form.
Easy way to score an audit? Don’t report part of your income. Those lottery winnings or unemployment checks received, they will come afloat sooner than later, and the same goes for cash job made, if the business owner, who you perform the job, decide to give you a 1099-misc form.
3. CLAIMING TOO MANY CHARITABLE DONATIONS
If you made significant contributions to charity, you’re elligle for a good deduction. This bit of advice is common sense: Don’t report false donations. If you don’t have the proper documentation to prove the validity of your contribution, don’t claim it. Pretty simple. Claiming $10,000 in charitable deductions on your $40,000 salary is likely to raise some eyebrows. Even I have clients who does even more than that, but hey, they have proof that they are really donating to their churches.
If you made significant contributions to charity, you’re elligle for a good deduction. This bit of advice is common sense: Don’t report false donations. If you don’t have the proper documentation to prove the validity of your contribution, don’t claim it. Pretty simple. Claiming $10,000 in charitable deductions on your $40,000 salary is likely to raise some eyebrows. Even I have clients who does even more than that, but hey, they have proof that they are really donating to their churches.
4. REPORTING TOO MANY LOSSES ON A SCHEDULE C
This one is self employed. If you are your own boss, you might be tempted to hide income (don't do it) the suspicion that too many reported losses can arouse. The IRS may begin to wonder how your business is staying afloat.
This one is self employed. If you are your own boss, you might be tempted to hide income (don't do it) the suspicion that too many reported losses can arouse. The IRS may begin to wonder how your business is staying afloat.
5. CLAIMING A HOME OFFICE DEDUCTION
Claiming Home Office deductions is very tricky and most of the cases raise a red flag. and can be seen as fraud. It may be tempting to give yourself undeserved deductions for expenses that don’t technically qualify. The IRS narrowly defines the home office deduction as reserved for people who use part of their home “exclusively and regularly for your trade or business.” That means a home office can qualify if you use it for work and work only. Occasionally answering emails on your laptop in front of your 72-inch flat screen TV doesn’t qualify your living room as a deductible office space. Claim a home office deduction only if you have set off a section of your home strictly for business purposes. Be honest when you report expenses and measurements.
Claiming Home Office deductions is very tricky and most of the cases raise a red flag. and can be seen as fraud. It may be tempting to give yourself undeserved deductions for expenses that don’t technically qualify. The IRS narrowly defines the home office deduction as reserved for people who use part of their home “exclusively and regularly for your trade or business.” That means a home office can qualify if you use it for work and work only. Occasionally answering emails on your laptop in front of your 72-inch flat screen TV doesn’t qualify your living room as a deductible office space. Claim a home office deduction only if you have set off a section of your home strictly for business purposes. Be honest when you report expenses and measurements.
6. USING NICE, NEAT, ROUND NUMBERS
The numbers on your 1040 form and Documents Proofs will not be in simple, clean intervals of $100, that is a fact. When making your calculations, be precise and avoid making estimations. Round to the nearest dollar, not the nearest hundred. Say you’re a Technician claiming a $781.38 course to learn about an especial repair as a business expense; round that to $781.00, not to $1000. If you get audit you will not have proof of those $1000 expenses.
The numbers on your 1040 form and Documents Proofs will not be in simple, clean intervals of $100, that is a fact. When making your calculations, be precise and avoid making estimations. Round to the nearest dollar, not the nearest hundred. Say you’re a Technician claiming a $781.38 course to learn about an especial repair as a business expense; round that to $781.00, not to $1000. If you get audit you will not have proof of those $1000 expenses.
If you have any question, regarding this topic, please get in contact with us, we will be glad to answer any question, you may have.
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