The probability of you coming up for an IRS audit is approximately one in a hundred; it seems pretty low, right? If you’ve ever been under the IRS audit gaze before, you’d want to lower those odds as much as possible. Being up for an IRS audit is not the end of the world (unless you have something to hide), but still best to avoid. But the audits are time-consuming. An audit can be a headache and cause 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 will 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 is filing a large number of charitable deductions on your adjusted gross income (AGI).
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. If you have all of the paperwork to back up your donations, you shouldn’t need to worry here. To be clear, being audited by IRS should not be an incentive not to donate. You should 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.
Employer Return Data
A red flag that significantly increases the probability of being audited is disclosing different income than what your employer tells IRS that you earn. To avoid this, you should ensure that all of your figures match third party statements that your employer has provided. If there are any differences and you believe that your employer has made a mistake, make sure that you contact him to resolve any discrepancies as soon as possible.
Filing Your Taxes Early
Filing your taxes before April 15th might not be a good idea! This is a commonly overlooked aspect, and many people don’t know that it can trigger an audit. I realize you want to get your taxes done early, but you might want to wait a bit longer.
The IRS has an audit quota, 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. However, waiting at least a month or two after April would be a great idea.
Online Tax Returns
And the last thing you can do to avoid an audit by the IRS is to file a paper return. 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. The IRS will run the software to flag suspicious tax returns when you file electronically, initiating an audit. Your best course of action is to do things the old-fashioned way and file by paper.