While your odds of an IRS audit are low, there are items that could increase your chances of triggering an audit. With tax season just around the corner, you should be aware of some of the clues left.
- Failing to report income. The old saying “Make a list and check it twice” is good advice in reporting your income. Don’t forget businesses are required to send the IRS copies of your W-2’s and 1099’s and your return should line up with all the forms you get.
- Claiming large donations. We all appreciate a cheerful giver but the IRS looks at donations comparted to your income level. Don’t be afraid to claim the donations you make, but be sure to have receipts and backup should they be questioned.
- Claiming business deductions for personal expenses especially when they are disproportionate to your income. If you have the documentation, then go for it but it could be questioned and you will need to support your position.
- Taking an early retirement payout. These are subject to a penalty (with several exceptions) and regular income tax so it is an area often looked at.
- You work for yourself or at home. This may not seem fair, but if you claim your home as an office and have business expense with low associated income it can be a trigger for the IRS. Again, having the necessary paper trail should you be asked is vital.
- Math errors. Don’t forget the numbers on all your forms should match up correctly and if they don’t you are asking to be questioned.
Filing a return and accurately reporting your income and expense is expected but documentation is vital component to this equation.