We get it, filing taxes is not something everyone loves to spend their time on. However, it is crucial to read and understand what is being asked of you, especially if you’re submitting your taxes electronically on your own time. It’s easy to fall into the trap of rushing just to get it done.
What if you work with a tax preparer? Well, the IRS can still audit you if you; fail to disclose all sources of income you may have, give the tax preparer insufficient information to complete your tax return to the fullest, or giving incomplete tax documents to the preparer. The IRS could care less if this was done accidentally or purposeful, which is why rushing will get you nowhere.
What are some reasons for a tax audit?
You leave out sources of income
This is the easiest way taxpayers can face a tax audit. This is very common in sole proprietors and independent contractors who also receive a 1099 form instead of a W-2. Many may not fully understand how much of a tax burden a 1099 form can cause. So, when a tax bill arrives that doesn’t look very appealing, it’s common to not disclose that information to keep 100% of taxpayers income tax-free. That isn’t a smart move in this scenario. The IRS has systems that are created to catch these errors when the numbers don’t quite add up.
You use whole or rounded numbers
Rounding your numbers may seem ideal and makes the calculations a whole lot easier and less time consuming, but it also raises a red flag in the IRS system. Why? Seriously, what are the odds of having an even number on your net earnings, or deductions? Slim to none. While it usually never gets this far, taxpayers can face criminal and civil charges providing inaccurate information. So it’s best to do the math right to avoid any consequences.
You file many deductions
Tax deductions are a good thing for many. It keeps you from paying taxes on certain expenses. However, deductions such as “home office deduction” raises a red flag due it being commonly misused by individuals. How will the IRS know if the deductions are legitimate? Well, they usually have a general idea due to your income level and other quantitative data they have gathered from similar filers. So, do not fall into the trap of thinking you can outsmart the IRS 100% of the time. It doesn’t happen that way for everyone.
How likely is that you’re going to get audited?
Lucky for taxpayers, while there’s still a chance of an audit, the chances are slim to none. 99% of the common persons’ taxes glides through the IRS system without being audited. As for the other 1%, of course, they’re being audited. If you’re a millionaire, your chances of being audited are 1 in 10. And if you’re a white house official, your chances are 100%. It may not be every year like Donald Trump’s situation for the past 12 years, but it will happen eventually to them.
As mentioned before, even though the chances of an audit are slim for the average person, anything is possible. $1 spent on a tax audit, brings in $4. Do the math. Do you think the IRS is going to let everyone continue to slide by without an audit? Not for long because it makes them more money. And let’s face it, all the IRS wants is your taxpayers’ dollars.
When filing your tax returns, make sure to take your time. The consequences outweigh the cost of telling the truth.