An IRS tax audit is no small matter. In the 2019 Fiscal Year, the IRS audited over 771,000 tax returns, which resulted in nearly $6.7 billion in additional assessments and taxes owed. While this rate actually comes out to fewer than 1 percent of individual tax returns being audited, it’s still important to guard yourself against any chance that the IRS will look at your tax return more closely. An IRS tax audit is a long and complex process that should be avoided if possible. At Sheppard Law Offices, we can help you steer clear of the IRS. There are several factors that the IRS considers when determining which returns to audit, such as inconsistencies on submitted forms, ID number discrepancies, and reporting numbers that are outliers among your demographic. While your return’s accuracy is key, we’ve collected some of the best ways to avoid an audit.
Double Check Every Detail
Even the smallest error can result in an audit, so it’s critical to double-check everything before submitting your return. Even something like incorrectly inputting a number from your W2 is enough to flag your return for the IRS. The IRS cross-references what they have on file with your submitted return, and if something doesn’t match, they are likely to investigate it. Double-check everything to ensure accuracy.
Don’t Round Numbers
When deducting expenses be sure to deduct exactly the right amount! Expenses rarely come to round numbers and a collection of expenses that end in .00 are sure to raise a red flag. Keep your receipts and deduct exactly what they say.
Not all deductions are created equal. Some warrant additional scrutiny and will be looked at more closely by the IRS. These deductions include home offices, medical expenses, self- employment expenses, and significant charitable donations. If you do intend to write off some of these expenses, provide ample documentation.
Fix Your Mistakes!
If you discover that you made a mistake on your return, fix it! You’re always able to file an amended return to fix a discovered mistake or provide information that you may have forgotten.
Remember To Check Your Mail
Don’t forget to check your mail as the end of the fiscal year approaches. Companies are required by law to send you important forms such as a 1099 form for income by January 31st. Once you’ve submitted, the IRS will often communicate with you through the mail, so be sure to check your mailbox.
Be Sure To Only Claim Business Expenses
It’s extremely important to delineate between your hobby expenses and your business expenses. Be sure to only declare expenses that are exclusively used for business purposes.
There are few things more universally feared than an IRS tax audit. Fortunately, there are ways to avoid them and, if need be, deal with them. At Sheppard Law Offices, we’re here to help. Whether you’re determining what you can write off, are being audited or are filing for bankruptcy, our tax professionals can help. Contact us today to learn more.