You go to work and pay your fair share of taxes to ‘Uncle Sam.’ So, why would you be on the IRS’ radar? You’d be surprised by how many could have gotten the target on their back. Likewise, there are several ways to keep this well-feared firm at bay.
On or About April 15
Did you know that roughly one percent of all tax returns filed by individuals actually is audited? That’s right, your chances of being audited may be slim. Moreover, the easier the return, the less likely you are to endure this process. That was the good news, now here’s the not so good news: Your chances of being audited increases as your income increases or the more complex your tax return becomes, even. Taxpayer Advocate says the rates for “unreal audits” are as high as 7.4 percent. An “unreal audit” is a correspondence audit from the IRS, whereby you are informed of inconsistencies between the numbers indicated on your tax return and third-party document. Here’s what you can do, so you never receive this alarming matter.
1. It’s easy for one to become tempted, when it comes to adding extra deductions on their tax forms. In other words, you may have checked-off everything but the kitchen sink. But, take note that high deductions for vehicle expenses, charitable contributions and employee business expenses, all can seem fishy to the IRS. What happens next? The IRS can ask to see your documentation. If, in fact, your expenses are legitimate, you have absolutely nothing to worry about; just as long as you have the proper paperwork to back-up your claim.
2. Innumerable individuals are unemployed in this economic climate; an issue that has plagued several households for years, now. How do many cope with financial woes? Some go into business for themselves, in order to make ends meet. Nonetheless, know that low or no income and high expenses for self-employment may cause the IRS to come knocking at your door. If you constantly show losses every tax season, it might appear that you are trying to write off your hobby. Just be sure to keep adequate documentation to support your deductions, in this instance, too.
3. According to Fox Business, national standards and your lifestyle, can be yet another aspect that won’t endear you to the IRS. If deductions are out of proportion with the income you’ve declared, this can be questionable. Further illustrating this point, if your postal address is Malibu, Calif. and you deduct property taxes of $50,000, DMV fees of $10,000, but are only showing $1,000,000 in earned income, the IRS will wonder how you are fitting all of this into your budget. What does this mean for you? The IRS may have to dig a little deeper to put these suspicions to bed.
Meeting the Deadline
Many think that being audited by the IRS is a random thing, but it is the total, exact opposite. Whether you are filing your income taxes on your own or are seeking the services of an agency, the best course of action is to check and double-check your paperwork, when filling it out. Moreover, take extra care before hitting the send button, a practice that can save your nerves from being frazzled in the end.