However, it is important not to go overboard. While random chance plays its role in tax audits (sometimes there is just no way to avoid some sort of an audit — no matter what you do), there are some red flags that may prompt a closer review of your paperwork.
Photo by blmurch via Flickr
Here are some tips for avoiding a tax audit:
Make less than 0,000 a year
Because people making more than 0,000 a year account for more than 60% of the taxes paid in this country, the IRS is very interested in looking for tax avoiders in this category. And, of course, to fill out my tax return. Apparently, I should feel very lucky that I wasn’t audited. As a result, all of the income on 1099 forms that showed my Social Security Number still had to be reported on the Schedule C, rather than with the income under my Employer Identification Number.
The IRS matches up what others report on your income with how much your report, so you want to double check to make sure that everything is in the right place. This goes for your spouse’s income (if necessary), income from hobbies and other types of income. I know, I’ve already called my tax professional to set up a time for me to come in and have a little chat about how things are going, taxwise. For years, before I began going to an accountant, I filled out my tax return by hand. For many, this time of year also means increased worries about the possibility of an audit.
The tax man cometh… Tax season is well underway. For those making between ,000 and 0,000, the total was around ,600; and for those making between 0k and 0K, the total amount of deductions is ,500. Home office deductions, especially if they are large and numerous, may raise red flags, although just taking them no longer marks you out, since technology has given rise to millions of home businesses and telecommuters.
Don’t fill out your tax return by hand
I’m guilty of this. As a result, if you make six figures, you are automatically in the running for a tax audit. Of course, the risk of being audited is no reason to avoid making more money; you just need to be careful about your documentation so that you are properly prepared in the event of a tax audit.
Don’t go overboard with itemized deductions
Itemized deductions can be quite helpful in lowering your taxable income and saving you some money. Manny Davis at Back Taxes Help points out that the average total deductions vary according to income. He points out that for those making between ,000 and ,000 in gross income each year, the average total of itemized deductions is right around ,000. You are not allowed to reproduce the content within this feed in any manner.
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While there is no full-proof way to avoid a tax audit, you can significantly reduce your chances of being red-flagged if you are careful about how your tax return is completed, from reporting your income to claiming investment losses.
Tags: tax audit, Taxes, Income Tax, six figures, Taxation
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This post was written by Miranda Marquit (Staff Writer)
Do you have a financial question? The IRS has forms you can fill out online, and you can use software that fills out your tax return.
Make sure all income is reported in the proper places
When I first switched to an Limited Liability Company (LLC), my accountant had all sorts of trouble with this. Tax returns filled out by hand raise red flags about accuracy, and can cause legibility problems. Some of my clients didn’t get the memo that I had a new tax identification number. You don’t have to go to the accountant to avoid a handwritten return, though. Keep records of your deductions, including receipts for charitable donations.
Be careful about home office deductions
You can take home office deductions when you telecommute or have a home business. Ask it now at Moolanomy Answers!
Copyright © 2007 - 2009 Pinyo B. If your itemized deductions exceed these amounts, you might be flagged. However, it is important to be scrupulous about the sorts of expenses you count, since anything you use for something other than business won’t be allowed. I even added in business expenses for what was then a sole proprietorship. And, if you know that you will be receiving a corrected W-2 or a 1099, wait until that comes in before completing your return.
Making sure that your tax return is filled out properly is your responsibility, as is making sure you have all of the proper documentation to back up your claims. This feed is provided for the convenience of Moolanomy’s subscribers.
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This post was written by admin on January 26, 2010
