Audit. It’s the dreaded “A” word at tax time. The word can send chills down almost any taxpayers’ spine. Being audited by the IRS is not a pleasant experience. But if you’re ever selected for an audit, it’s not the end of the world. You can get through it. And if you need help, you can contact GROCO. In any case, did you know that your chances of being audited are actually quite slim? Furthermore, if you do everything right and on the level, then you have nothing to worry about, even if you are selected.
On the other hand, if you knowingly cheat on your taxes, then anything is possible. But lets’ say you do everything by the book; could you still be audited? Yes, it’s certainly possible, but there are certain things that make you less likely to be audited. So, are you doing the right things to avoid being audited? Here are a few things to watch out for.
Common Mistakes the Make Audits More Likely
Speed Kills–one of the most common mistakes people make is to rush through their taxes. No one wants to spend more time than they have to filing their tax return. The problem is, when you go to fast you’re more likely to make mistakes. The more mistakes you make the more likely you’ll get the IRS’s attention. Slow down. Take your time and get it right the first time. This will reduce your chances of being audited.
Guesstimating–in case you weren’t aware already, the IRS is into the details. In other words, they like accuracy. Sure you can be off a few cents, but guessing on the numbers throughout your return is sure fire way to increase your audit chance. The best thing to do here is use the actual hard numbers. Leave the guessing to your lottery numbers. Get your tax numbers exact.
Paper Filing–does anyone still file his or her taxes on paper? Well, some taxpayers actually do. But you shouldn’t if you want to lower your risk of being audited. It’s not that paper itself is a problem. It’s that you’re more likely to mess up if you do your taxes on paper. With so many helpful electronic tax tools available your data is more likely to be accurate, thus reducing your audit risk.
Using Deductions Unwisely–everyone loves deductions.But if you appear to be claiming too many deductions then you might cause the IRS to take a closer look at your return. It’s perfectly legal to claim every deduction you’re entitled to. But make sure you have hard proof of every deduction you claim. Also use hard numbers when reporting your deductions instead of guessing or rounding. Your deductions should also be in line with your income. Claiming a charitable deduction of $20,000 when you only make $55,000 is a great way to raise suspicion.
Be Honest and Be Smart
The bottom line, if you want to lower your audit risk, stick to these simple rules and avoid doing anything dishonest.
The post Are You Increasing Your Chances of an Audit? first appeared on Advisors to the Ultra-Affluent – Groco.
