While a vast majority of taxpayers do not have to worry about getting audited, there is still a chance that you could be audited. Especially since these audits are deemed by the IRS as both a money maker and a way to keep taxpayers honest. Consult with a tax professional or accountant, such as Brian Walsh EA in Mahwah, NJ, as they can assist you with making sure that your returns are error free. Yet here are 8 areas that you will especially need to make sure are error free to avoid potentially triggering an audit.
If you have a particularly good year in terms of income, you may get audited. The reason is that if there is an error on your return, the likelihood is that you will have more of a potential penalty or owe more than a smaller wage earner. Recent date indicates that your chances of being audited go up along with your income. Therefore, you need to be sure to find those deductions that can reduce your overall gross income and thus lower your audit chances.
If you are self-employed, you are responsible for not only your taxes, but also your bookkeeping. Therefore, the IRS may take a greater interest in your return and your ability to potentially fudge your numbers. Additionally, if your business shows losses in consecutive years, the IRS may trigger an audit to determine if the business is in fact a hobby.
If your tax preparer cuts corners, then you may find that the IRS wants to audit your return for potential discrepancies and other errors. Therefore, you will need to be sure that you use a reputable tax preparer. This means taking the time to investigate their credentials and background. After all, you will be responsible for the costs of any errors, whether you knew about them or not.
If you file by hand, the IRS is more likely to pick you for an audit. Most taxpayers today are filing using an electronic method. Using software can assist you in limiting your potential mistakes, but those who choose to file by hand are more likely to have mistakes and errors that draw the attention of the IRS. So consider filing electronically if possible.
If you are a freelancer, then you need to be aware that each company which paid you more than $600 will need to send you a 1099, which is also sent to the IRS. They will then use these to match up your 1099 reported on your return versus the ones sent to them by vendors and companies that you worked for. Therefore, be sure to go through all your 1099s and report them on your return. If you think you might be missing one, do not hesitate to contact the company for a duplicate copy.
If you are turned into the IRS by an individual who says that you have not reported all of your income, then you will run the risk of an audit. If the audit is deemed successful, the whistleblower can receive a reward. Therefore, you will want to be sure to make sure that you turn in an accurate accounting of all of your income and deductions. This will make you less tempting to potential whistleblowers and to the IRS.
If you have large deductions, then you need to be sure to have all the supporting documentation for those deductions. By doing so, you will be sure to be ready to answer any questions from the IRS, should they choose to audit your return. Discrepancies between the values of a specific good and the actual write-off can lead to a letter from the IRS asking for backup documentation. If you can provide it, usually that will end the matter. However, if you cannot, you may need to make a payment to the IRS.
When it comes to filing for health insurance through the marketplace, you will need to be sure that you received the 1095-A, which helps to determine if you received the correct subsidy amount. However, if your forms were not filled out correctly, you may receive a letter from the IRS. It is a new system, so the potential for errors is slightly higher. Work with your tax preparer to make sure that you have filled out correctly.
Click on the link below to contact a tax professional or accountant at Brian Walsh EA in Mahwah, NJ, who can assist you making sure that you have an error free return and as a result, will be less likely to get called for an audit.
Brian Walsh EA