What if you could file taxes without any fear of audit?
Most Americans file their taxes with at least a little bit of fear. That’s because they must constantly worry about their chances of getting audited.
Fortunately, there are a few easy ways to seriously reduce those chances. By following these easy tips, you can kiss those fears goodbye!
Check Those Numbers
This first tip may sound obvious, but it’s worth getting it out there: you need to seriously doublecheck all of your numbers.
If we’re being honest, taxes can be really confusing. That’s why accountants stay so busy! When doing taxes on your own, it’s easy to leave out an important bit of information or put in an incorrect number.
That’s why you need to have all of the relevant paperwork in front of you before you begin your taxes. Furthermore, you should check the accuracy of all numbers, multiple times before submitting anything.
For better or for worse, much of the IRS is automated now. Never forget that discrepancy in your numbers can very easily trigger an audit!
Be Careful About Deductions
Tax deductions are a real lifesaver for many people. That’s because the right combination of deductions can seriously reduce how much you owe.
At the same time, the IRS pays attention to certain averages numbers. For example, the average number of deductions. If your deductions are much higher than average, you are likely to increase your chances of getting audited.
It’s also important to make sure that you are only counting relevant deductions once. If you accidentally try to count a deduction twice, it may trigger an audit of your taxes.
Keep Deductions Realistic
Now you know the importance of keeping the “deduction to income” ratio low. Want some other deduction advice? Try to keep your deductions as realistic as possible.
For example, it’s easy to try to claim certain things as deductions that do not “count” for tax purposes. At that point, the IRS may have trouble determining if you are simply ignorant about taxpayer rules or deliberately trying to game the system.
Frequency also matters. When a business reports losses for the third or fourth year in a row, this can raise suspicions.
In short, try not to go overboard on your deductions. And make sure each one is both legitimate and that you can back it up via tangible evidence.
Here’s a bit of general advice that applies to all levels of tax paperwork: honesty really is the best policy.
It’s tempting to stretch the truth when filling out taxes. Maybe a part-time job failed to send you relevant tax paperwork. At that point, you may think, “What’s the harm if I omit this from my taxes?”
Some people go so far as to directly lie about their main salary. This is usually an attempt to lower their tax bracket and their overall liability.
However, each employer should be reporting employee income to the IRS. If you lie (or simply stretch the truth about income), it is very easy to detect. At that point, an audit becomes inevitable.
Get the Exemptions Right
Exemptions are another way to reduce your overall taxes. Unfortunately, many taxpayers are confused about exemptions and end up making mistakes on their filing.
For example, there are very specific rules about who can be included as a dependent on your taxes. If you mess up and try to claim your spouse as an independent, then you may run the risk of an audit.
For maximum accuracy, you should refer to IRS documentation regarding tax exemptions. Don’t forget that you always have a chance to consult with a professional as needed!
Reconcile That Paperwork
For the most part, living in the digital age has made things easier for all of us. But it also makes things more noticeable if you make any errors on your tax paperwork.
For example, the IRS can very quickly check your tax return against other documents such as Social Security paperwork. And, of course, they can quickly compare federal tax returns to state tax returns.
If there are differences in things like income between these documents, it may trigger an audit. That’s why it is definitely worth your time to make sure all of your numbers match up across your various paperwork!
Want a bit of good news? Chances are that you’re already doing something each year that reduces your chances of being audited.
By e-filing your taxes, you make it less likely to be audited. Why is that? The IRS has discovered that paper tax returns are far likelier to have errors in them than electronic returns. In fact, paper returns have a 21% error rate compared to the .5% error rate of electronic returns.
This may simply be a matter of tax preparation software helping ensure the accuracy of various numbers. Whatever the reason, this provides another incentive to file electronically!
Here’s another simple trick to reduce the odds of an audit: always file your taxes on time.
Your goal around tax time is to stay off the IRS radar. Remember: millions and millions of people file tax returns each year, and they can only audit a small fraction of that.
Filing taxes late or filing multiple returns instantly gets their attention. By filing a single return in a timely manner, you make it less likely to see an audit.
Many people who are audited have not done anything wrong. And even if the IRS discovers discrepancies, many of those are going to be honest mistakes instead of deliberate fraud.
To reduce the chances of such mistakes, it’s worth having your taxes prepared by a professional each year. Not only do they know how to help you avoid an audit, but they can also help you discover additional deductions and exemptions that you may qualify for.
Reduce Your Chances of Getting Audited: The Next Step
Now you know how to reduce your chances of getting audited. But do you know who can help you with every aspect of your taxes?
We specialize in tax returns, financial planning, and more. To see how we can help out with your own returns, contact us today!