How Not To Get Audited By The IRS
If you are a money savvy person, it is likely that one of your worst nightmares is being audited by the IRS.
In this article I am going to show you how to lower your chances of getting audited while still getting the best possible tax refunds and using the highest deductions possible.
The IRS audits around 1 in every 115 tax returns.
The odds of getting audited go way up the more money you make.
So, if you really don’t want to get audited just don’t make any money. Just kidding.
Report All Your Income
Keep meticulous records and be sure you report every bit of your income. Don’t forget the interest you received on a bank account you hardly use.
The bank will report your interest and if you forget to put it on your tax return it could trigger an audit.
Travel And Entertainment Excessive
Deductions for meals or travel will get the IRS looking closely at your tax return. For meals keep receipts and take notes.
Who were you with?
What did you discuss?
Claiming that your car is solely used for business will have the IRS looking you over with a magnifying glass.
So You Are A Gambler
Reporting large gambling losses or not reporting your gambling gains will get you audited faster than you can say black jack.
Also you can not deduct travel and meal expenses related to gambling unless you are a professional gambler.
Your chances of audit are greater if you are running a small business.
Do not under report your income or take excessive deductions. Keep good records.
Watch Those Deductions
It is important that you take the time to properly monitor the deductions that you are claiming.
If you’ve decided to claim your own small business, make certain that you’re not actually claiming a hobby.
How can you tell the difference?
Businesses are supposed to make money within the first three years of operation.
So if you’re claiming deductions on your taxes for a business, make certain that you’re actually earning a profit within a few years If not you have a hobby not a business.
If you claim deductions from a hobby you are asking to get audited.
Another major red flag for a tax audit is deductions claimed for home office expenses.
This is because home offices are one of the most easily misunderstood deductions.
While you should definitely claim home office expenses if you qualify for them, it is important that you understand exactly what is required for you to qualify for the deductions in the first place.
For example, many people who claim home office expenses do not actually have a dedicated home office.
In order to file for the deductions you must have an area of your home that is used exclusively for work. This means that the family computer does not qualify as a home office area.
Neither does the corner of your dining room.
You literally must have a partitioned area or room that is used only for work.
If you are going to claim business expenses or home office expenses be sure to keep meticulous records in case of an audit.
Determine If You Really Need Professional Help
If your taxes are relatively simple you may not need professional help with your taxes.
If you work a normal job with a paycheck and don’t have anything else going on you can probably do your own taxes and save some money.
If you opt to do your own taxes, you can check out several different services and software options such as TurboTax by Intuit, or H&R Block’s online tax preparation software.
When using these software options you will be asked frequently to buy their professional versions. Ask yourself if you really need the additional features or if you can get by with just the free versions.
Selecting The Best Tax Preparer
If you decide to hire a professional make certain that you take the time to select the best preparer possible.
Why is this so important?
Well, believe it or not, the IRS can actually audit every return that a tax preparer completes if they find that the preparer in question has been pushing things or simply doesn’t know how to properly prepare tax returns.
What does this mean for you?
If you select a poor Accountant and another return that they file gets audited, then you may find yourself facing an audit if they filed the return negligently.
So how can you select a qualified tax professional?
Start out by looking for specific certifications and qualifications.
Check to see if the person preparing your taxes is a CPA or Certified Public Accountant.
Before deciding to go with a specific tax professional, make sure that you go online and check for past customer reviews or complaints.
By taking just a little bit of time to do some diligent research, you can save yourself a lot of frustration.
You can also ask friends and family for recommendations for tax preparers and CPA’s.
Final Thoughts On How Not To Get Audited
Avoiding an audit by the IRS really isn’t nearly as difficult as it may sound.
You need to make certain that you have all of your documentation in line
and you’re only claiming deductions for which you truly qualify.
The Frugal Man
Here are a few other articles that may interest you.
Please Share This On: