Understanding what triggers a tax audit will help keep your return on Uncle Sam’s good side this year.
Do you know what triggers a tax audit? While most every tax-paying citizen knows what an audit is, very few are aware of the red flags they should avoid. However, the last thing you want to find in your mailbox is a personal letter from the IRS. Luckily for you, there are ways you can avoid catching the government’s attention.
Here are some of the most common reasons for tax audits:
Not Signing on the Dotted Line
Believe it or not, one of the most common audit triggers is pure carelessness. Maybe you forgot to fill out a few lines, or perhaps you didn’t sign at the bottom of the page. While everyone makes mistakes, you don’t want any to appear on your tax return.
To avoid simple errors, always check and double-check your work. Make sure you didn’t rush through and forget anything. It would help if you also used a calculator to ensure your math is correct. And always remember to sign your return—the IRS won’t process your taxes without a proper signature.
Exaggerating Your Deductions
No one wants to overpay on their taxes. That’s why so many taxpayers search high and low to find all applicable deductions. For the most part, deductions are safe, but if you take too many large ones, Uncle Sam may raise an eyebrow at you.
Before you deduct any expenses from your return, make sure they apply to you. Sure, claiming a home office may save you a ton of money, but do you really qualify for this deduction? As long as you have the receipts to back up your claim, you should be safe if the IRS does issue an audit. Always remember: a bulletproof paper trail is your best friend during tax season.
Missing IRS Forms
The IRS requires you to report all forms of taxable income to the government. Not only should you enter all payments you received from your employer, but you must also include your side-hustle, interest paid, or any tips. Even if you win big on the lottery, you owe a percentage to Uncle Sam.
If you receive payments from multiple sources, it may be tricky to keep everything organized. Before you file, make sure you have all your tax forms in front of you. Sometimes things get lost in the mail, but it’s up to you to contact the issuer to have them send you a new copy.
Drastic Income Changes
You received a huge raise this year. Congratulations! Or perhaps you decided to reduce your hours to stay home with the kids more. Both situations may cause your income to either skyrocket or plummet. While this shouldn’t be in issue to you, the IRS may view things differently.
The government could decide to investigate any drastic income changes. They may question underreporting or wonder where you earned all the extra money. To avoid any problems with your taxes, make sure you keep your paycheck stubs on hand. Be ready to prove to the IRS how much money you made, and they should stay out of your hair.
File Your Taxes with Confidence
Worrying about an audit is no reason to put off doing your taxes any longer. The sooner you file your return, the better you will feel. Instead of filing alone, let Incompass Tax, Estate & Business Solutions lend you a hand. Our tax professionals know all the current tax laws, and we will make sure the IRS accepts your return the first time.
With over 29 years of experience, you can trust your taxes in our competent hands! Contact our experts to learn more about what triggers a tax audit before you file this year.