Filing early, filing late, filing in March and filing online are each viable reasons for the IRS to pick you for an audit, right? If you make over $100,000 a year, you have a higher risk of being audited than someone who makes less than that, right? And if you have a lot of medical expenses in one particular year, you’re doomed to be audited by the Feds, right? To be honest, there’s a bit of truth to each of these scenarios as well as a touch of fiction added for good measure, as the fear of an IRS audit is one that plagues us as US citizens, to say the least.
But what exactly is it that would make one particular federal tax return stand out amongst the masses, one that would trigger an audit into your personal, financial world by the Internal Revenue Service? To assist in the answering of this question, we’ve compiled some top tips as revealed by some of the most notorious IRS experts out there:
- To the self-employed- keep all of your receipts. If you make over $100,000 a year in a primarily cash payment business (the vast majority of them are), your chances of being audited are more than twice that of a corporation or partnership. The best defense? Be able to prove all of your deductions, and expect to be in trouble if your “company car” travels across the country in the fall to attend college, or your weekly nail appointment cannot be medically connected to carpel tunnel.
- To everyone with concerns of being audited- file late with all of the masses. Think about it this way; if you were an IRS agent itching to get into the tax season, wouldn’t you be waiting anxiously at your desk for the first tax return to spit out of the official computer with a few questionable deductions? But by the time April 15th rolls around, the rejected or extended returns will be a dime a dozen, so the larger issues will take precedence over the smaller.
- When in doubt, attach copies of receipts to back up your claims. Say, for example, you or someone in your family had a difficult year health wise and have a lot of medical bills to prove it. In fact, the bills added up to well over the 7.5% minimum to allow a deduction on your 1040 form. If you attach copies of all of your statements directly to your return, any red flag that arises during processing have a god chance of being overlooked when the necessary documentation is readily available to back your claims.
- Buying and/or selling of real estate one of the biggest tax snafus. If you sell a home (primary residence) and make a profit, you can have up to two years to reinvest the money for another without having to pay taxes on it. But, state laws governing the sale of homes and monies made can differ greatly from one state to another, so it’s best to consult an attorney, tax specialist, and/or realtor for the details of such a transaction and ultimately keeping the feds at bay.
