Some tips to help you avoid an IRS audit
The probability of a person being audited is around one percent; seems pretty low, right? Well, if you’ve ever been audited before, you’d want to lower those odds as much as possible. To be fair, being audited by IRS is not the end of the world (unless you have something to hide) but it’s still time consuming. An audit can be a headache and cause of a lot of unwanted stress, so you may want to ensure that the IRS stays out of your way as much as you can.
Now, when I said that your odds of getting audited were around one percent, I meant that in general. Many other factors can increase or decrease your odds of being audited. I’m going to go over some of the most common triggers that give the IRS more reason to audit you.
One of the things that can come back to bite you in the butt on your taxes is filing a large amount of charitable deductions on your adjusted gross income.
A good formula that can help you make sure you’re not going overboard is taking your total amount of charitable deductions and dividing it by your AGI. If the sum is above 10% you have highly increased your odds of receiving an audit. Now, if you have all of the paperwork to back up the validity of your donations, you shouldn’t need to worry here.Just to be clear, being audited by IRS should not be an incentive not to donate. You should just be aware that allowable deductions and tax incentives like donations are things that IRS is looking for when they try to pick up their sample.
Something that is a red flag and greatly increases the probability of being audited is disclosing different income than what your employer tells IRS that you earn. In order to avoid this you should make sure that all of your figures match your third party statements that your employer has provided. If they are any differences and you believe that your employer has made a mistake, make sure that you can contact him to resolve any differences as soon as possible.
Filing your taxes before April 15th might not a good idea! This is a commonly overlooked aspect, and many people don’t know that it can trigger an audit. I realize that you want to get your taxes done as early as possible, but you might want to wait just a bit longer.
The IRS has a specific quota of audits that they must reach and they try to get them out of the way as early as possible. If you’re the type of person who likes to get things done early, you may need to prepare yourself for an IRS audit as well. It’s not fair, I know! In general, you have the option to file your taxes at the latest in October. Now, I’m not saying that you should wait that long to get your taxes done, but waiting at least a month or two after April would be a great idea.
Everyone has internet access and a PC these days, so more and more people are filing their taxes online. It’s fast, easy and usually free, but there is a downside. When you file electronically it will allow the IRS to run the software they use to flat suspicious tax returns , which can possibly initiate an audit. Your best course of action is to do things the old fashioned way and file by paper.
Note: This is a Guest Post contributed by a professional services firm from Cyprus. They offer audit, tax and other professional services.
Photo By: Bradley Gordon