Hearing the word “audit” strikes fear into the hearts of even the bravest of men and women. There are so many myths and negative views when it comes to an IRS audit. No one wants to be audited by the IRS. Avoid making these seven mistakes and you should okay.
Not reporting all income.
Being self-employed or freelancer can be quite tricky. And sometimes, people try to hold onto money by not reporting all of the income they’ve made. This is a huge mistake because the IRS receives the same 1099 and W-2 tax forms that you do. If your income does not match up to what they have, that sends a red flag to the IRS and you will likely be audited.
Excessive businesses expenses.
Business expenses are the cost of carrying on a trade or business. An example of a business expense would be office supplies, a vehicle designated specifically to conduct business. A red flag to the IRS would be a cell-phone bill with too many personal calls.
Reporting a home office.
The IRS says that the criteria for claiming a home office on your taxes must show that the business receives “regular and exclusive use” of that office and it is the principal place of your business.” The home office cannot be just a convenient place to work from time to time. You must have a designated space for your work and use that space exclusively for work.
Using the wrong filing status.
Marriage and divorce happen and so, too, do changes in filing status.Going from filing “Married filing jointly” to “Single, head of household” could be a possible IRS audit trigger. Make sure you fill out all of your information correctly to ensure you don’t draw the ire of the IRS.
Fudging your math and numbers.
People make mistakes. We’re human. However, your taxes should be one area where people do their best to pay close attention to detail. Some people even think they’re being helpful by rounding numbers to the nearest whole number. Don’t do that. The IRS expects to see cents and odd numbers. Rounding up will incur an IRS tax audit and fines.
Filing personal expenses as business expenses.
Some people try to claim personal expenses as a business expense. Be careful of what you mark as a business expense. For example, if you have a vehicle that you use for both personal and business use, claiming it on your tax returns can be cause for an IRS tax audit. Travel expense is an area that can raise a red flag. If your travel was not business-related, do not claim it as a business expense.
Claiming too many charitable donations.
Giving to charity is awesome and could be a tax write off. Make sure you keep proof of charitable donations. Don’t falsify donations and do not report what you cannot prove. Otherwise, you will raise the suspicions of the IRS.