Tax Season: How to Avoid an Audit This Year

Nothing sends shivers up the spine more than a tax audit. Although only 1 percent of returns are audited in a given year, there are ways that you can reduce your odds of hearing from the government even further. What are some things that you can do to avoid a tax audit?

Don’t File a Paper Return

While filing a paper return doesn’t increase your odds of getting an audit on its own, it does increase the odds that you will make a mistake. Forgetting the carry the one when you add up all of your income for the year could cause you to claim a credit, or ask for a refund that doesn’t belong to you. Sloppy handwriting or a bunch of eraser marks could also make the IRS think that you are trying to fudge your return somehow. Do yourself a favor and file your return electronically.

Make Sure You Have All Your Tax Forms Handy

Don’t forget to claim all of your income regardless of what source it comes from. If you don’t receive your Form W2 or Form 1099 from an employer, or from a company that you did freelance work from, make sure you get it before you file your taxes. Even if you don’t get a copy of the form, you can be sure that the IRS will. Make sure you keep copies of all tax forms from your bank, financial adviser, and any creditor that forgave debt in the past year. You will be required to disclose information regarding any profits that you made from investments. Any debt that is forgiven by a lender is considered taxable income by the IRS.

Don’t Take Deductions That You Aren’t Entitled To

If you are a self-employed individual, it may be enticing to take deductions that you don’t actually qualify for. For example, you may be tempted to take the home office deduction even though you don’t have a home office, or it doesn’t meet the requirements for a home office that the government sets forth. Remember, to qualify as a business deduction, the object has to be used exclusively for business use as well as be ordinary and necessary in your line of work.

Have Someone Else Do Your Taxes

It may not be a bad idea to have someone else do your taxes for you if you are not sure how to do them on your own. Those who run their own business, or otherwise have a complicated tax return may want to have an enrolled agent do it for them. As any Milwaukee fraud attorney will tell you, an enrolled agent is someone certified by the IRS to be completely knowledgeable of the tax code. While you can get advice from a lot of people, going to an enrolled agent for help is always your safest bet.

Stay Organized

The IRS can audit your return for up to three years after you file it. This means that you shouldn’t get rid of any receipts or any other documents that are less than three years old. If the government does send an audit, you will want to make sure that you have evidence to quickly end the audit in your favor. In some cases, the government will actually give you money at the end of an audit if you have proper documentation.

You can’t be sure that you won’t be audited. However, you can reduce the odds to almost zero by following the rules and keeping records of everything that you do. This way, the government won’t have any reason to select your return for further examination.

Tags: Tax

Category: Tax Management, Taxes