As you gear up for tax season, you may have the nagging concern: “What if I get audited?” While there can be an element of randomness in whom the IRS decides to audit, there are a few red-flag situations where an audit may be more likely—thus requiring the help of a Denver accountant. But don’t fret just yet. We’ve compiled a list of ways you can avoid a tax audit, or at least make it a little less likely:
- Report all income – It’s not just about your W-2. If you have Form 1099 income from freelancing or other contract work, stock dividends, or interest, you must report all of it. Remember that the IRS already knows what’s listed on your 1099s, so if you avoid reporting it, chances are likely they’ll figure it out. The same is true if you’re self-employed and want to hide income by claiming personal expenses as losses (called Schedule C losses). Do this one too many times and the IRS may wonder how your business is surviving…and may come knocking.
- Stay error-free – Simple math errors can put a spotlight on your tax return and cause the IRS to want to look deeper. And even if those errors were completely accidental in nature, even the most innocent mistake can be problematic. The best thing to do is to double- and triple-check every number, especially if you plan to do your own taxes. For peace of mind, we recommend that you work with a tax professional, if possible.
- Avoid estimations – If there are too many round numbers on your tax return (such as $100, $500, or $1,000), you could be trying to estimate instead of being precise. While it’s OK to round to the nearest dollar—say, from $95.85 up to $96—it’s not OK to make that leap to $100. If that’s the case, the IRS could get suspicious.
- Take care with business and home office deductions – Often people are tempted to claim nearly everything as a business deduction, but the true question to ask is: was the expense absolutely necessary to your business or work duties? If not, it’s better to leave it alone. In the same vein, claiming your home office as a deduction isn’t a good idea if you don’t work or run a business from a dedicated space within your home. Answering occasional work-related emails from your laptop in your living room doesn’t qualify.
- Use common sense in charitable deductions – Once again, too much of anything is not a good thing where the IRS is concerned. And the same is true for charitable deductions. While giving to charity affords you the right to a tax write-off, most people who deduct for charity claim it as a very small percentage of their income. So don’t report false donations, especially if your income is $60,000 per year and you’re claiming $30,000 in charitable contributions.
For more on this topic, check out Forbes.com’s list of ways to invite an IRS audit
Whether you need personal
tax preparation, or in the event you find yourself facing an IRS audit
, contact the Denver tax specialists at Bloch, Rothman & Associates. We can help you navigate the process and will communicate with the IRS on your behalf, so you can clear up any tax controversy and get on with your life. Call us today
for a free consultation: 303-321-7160.