Tax Tips for Those Who Don’t Want to be Audited
It’s hard to believe but tax season is already closing in upon us. While April 15th is still a few months away now, it won’t be long before that deadline is staring you right in the face. Even scarier than the thought of rushing to get everything done is the idea that you might make a mistake and get (*gulp*) audited.
According to Money only about 1% of tax returns get subjected to audits. Still it remains a big fear for many Americans. That’s why the site recently compiled a list of seven tips to help prevent an auditor from knocking on your door.
The first tips is pretty straight forward: report all of your income. This doesn’t just boil down to being honest about how much you made during the year but also keeping track of any side jobs you may have held. Be sure to think carefully and ensure you’ve received all of your 1099s and W-2s before submitting. Keep in mind that the IRS will have copies of these forms as well.
A basic theme when it comes to taxes is that it’s better to be overly specific and detailed than not detailed enough. This is especially true when it comes to deductions that might seem odd to the IRS. A good practice is to go above and beyond when recording charitable donations, even if it’s not technically required. The average American who makes over $80,000 a year gives about 3% of their income to charity so, if your ratio is higher, you might want to explain why.
Being self-employed leads to all kinds of tax deductions as you start estimating how much you use your possessions for work as opposed to pleasure. If your work-use percentages seem a little generous, it could lead to an audit. It’s not very likely that you use a vehicle or computer for business 100% of the time and thus claiming so could render your tax return suspicious. In the rare case that you do use these items exclusively for business it couldn’t hurt to show some extra proof.
As you’d expect accuracy also plays a big part in avoiding an audit. If you’re filing your return without assistance be sure to do your homework and ensure that what you are submitting is 100% correct. It may also be a good idea to look it over a second or third time before sending it off.
Once you’re absolutely confident and ready to submit your return, it’s best to submit it electronically. As more taxpayers have taken to e-filing their taxes the rate of errors has dropped significantly. In fact 21% of returns filed through snail mail contained errors while a mere 0.5% of electronic returns did. Not only is the e-filing method more convenient but it could also help you avoid an audit.
Nobody wants to face a tax audit. Luckily there are a number of ways to help avoid being subjected to one. By being completely honest, properly accounting for all of your income and deductions, and ensuring total accuracy you can help turn that 1% chance into a near 0% chance.
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