How to Avoid Getting Audited
It’s tax season and everyone is worried about getting audited by the IRS but the good news is that audits happens pretty rarely; however, it does happen to every once in a while to some people. Statistically, approximately 2% of people get audited and although this is true, it’s important to know what can increase as well as decrease your chances of being audited by the dreadful IRS.
Let’s take a look at a few things that you can do to avoid being audited by the IRS.
First and foremost, make certain that all of your information on the paper forms or the online forms is completely accurate. The slightest misspelling of your name could cause an audit, although it isn’t likely without other probing factors. You should make certain that you input the information on the IRS form from your W-2 or 1099’s is absolutely correct from the name of the company and their tax-id to the amount made and taxes taken out. If you mess up on your return, the IRS will notice this and be tempted to take a closer look at the rest of your tax return to see if any more mistakes were made. This could cause you to pay more money in, or possibly get more back, depending on the situation.
Another thing is to ensure that you claim the correct number of exemptions and dependents. Be sure you claim individuals that are qualified dependents. You can check the requirements on the IRS website or with your local tax accountant or firm. You can really only claim people that lived with you majority of the year and that you helped support. By adding dependents this year that don’t belong, removing them next year, then adding them again, could cause an audit by the IRS.
You also need to make sure that you file as the right status – single, married, etc. Many may think they shouldn’t claim they are married if they got married within the last week of the year; however, you claim your status as of how you were on December 31. Therefore, if you were married on December 30, you need to file married filing separately or married filing jointly, depending on how you and your spouse plan on filing – separate or together.
You should also be sure to report all of your earned income whether it is on a 1099 or W-2. You must remember that the IRS receives all the same forms that you do so if you don’t report a W-2 on your tax return and you made more than $600 from that employer, you have strengthened your chance of being audited. The IRS received that W-2 as well and knows that you didn’t report it on your tax return.
Don’t go completely overboard with itemized deductions – this is whether you run a home office, small business, or not. You can claim several deductions for having a home office as well as deductions for a small business. Some of these itemized deductions include gas, meals, supplies, etc. The most important thing regarding this area is to make certain that you have solid proof to back up these expenses that you incurred throughout the year for which you are claiming as deductions.
Lastly, double-check your forms before you submit them to the IRS. You may very well be able to catch your mistakes before you submit them.