No one wants to experience a tax audit. The good news is that most people never will have to go through that experience. The IRS simply doesn’t have the time and resources to audit every tax return. In fact, the IRS only audits about 1 percent of all returns. That means most people don’t have to worry about being audited. However, if you want to be extra careful and decrease your odds off being chosen even more, there are some tips to keep in mind when you file your tax return.
There are some red flags that could increase your chances of catching the IRS’s all-searching eye. Here are a few of them:
- You make a lot of money
- Your deductions are higher than normal
- Your charitable deductions are high
- You don’t report all taxable income
- You own or run a small business
- You claim the alimony deduction
- You claim a loss for a hobby
- You claim rental loss
- You deduct a lot of business expenses: travel, entertainment and meals
- You don’t report a foreign business account
- You cash out some of your 401k or IRA early
- You claim large gambling losses or don’t report big winnings
These are some of the most common ways to get the IRS’s attention, but if you avoid these kinds of things you might reduce your chance of an audit.
However, there is no full-proof way to avoid an audit, but keep this in mind: as long as you are being honest on your taxes you don’t have anything to worry about. Even if you are selected for an audit you will come out unscathed if you have nothing to hide. Another thing that can help is to contact a professional tax preparer to do your taxes for you. This will decrease errors and your chances of being selected for an audit. Contact GROCO if you need help with your taxes. Call 1-877-CPA-2006, or click here.