While there is no official guaranteed way to avoid having your taxes audited by IRS, there are a few tips that you can follow to lower your likelihood of being audited. In 2019, IRS audited 0.45% of submitted tax returns. For reference, that’s approximately one out of every 220 taxpayers.
Even if your tax returns are completed seamlessly, there is still a possibility of being audited. In addition to auditing returns prepared incorrectly or whose forms don’t match the returns, IRS also audits a randomized selection of returns on an annual basis.
Following these tips is likely to provide your best chance of avoiding an audit, besides the chance of being randomly audited.
Double-check your math
While it may seem silly, one of the first things that IRS checks when reviewing your tax submissions is whether or not your math is correct. While it may seem like a small, silly mistake to make, making a mathematical mistake has the potential to hold catastrophic results for your tax returns.
Aim for normalcy
While there are various opportunities in life to strive to be different, out of the box, and unique, filing your taxes isn’t one of them. If there were ever a time to wish to assimilate into a crowd, it’s tax season.
Check your Social Security Numbers (SSN)
When preparing your taxes and typing seemingly endless numbers and figures, it can be easy to make a mistake and not notice a wrong number or two. This especially is the case with your Social Security Number. Many tax filing programs and systems ensure security and privacy by hiding your confidential information following its submission.
This is largely the case when submitting your SSN in particular. Double-checking to ensure that your SSN was typed correctly may seem like a silly issue to have, but is more common a problem than one might initially expect.
If you’re a young adult or college student, you should make sure to call home before officially filing your taxes. It’s a common mistake that young students may end up being contacted by IRS due to duplicate filings. This happens when the parents claim their child as a dependent unbeknownst to them and the student files their taxes as an independent as well.
Luckily, this is an easy problem to fix. A simple conversation with your guardian, or anyone who could claim you as a dependent, can provide clarity to ensure that you file correctly.
Be thoughtful when assessing your credits and deductions
The number of available credits and deductions can be overwhelming. You want to ensure that you claim relevant deductions, but also want to ensure you’re not claiming anything you’re not 100% certain you’re eligible for. If you think you may be eligible for a certain claim or deduction, be sure to read the descriptions on the appropriate form very carefully to confirm that you are in fact eligible to claim it.
In the event that you incorrectly claim a deduction that you turn out to be ineligible for, you may end up having IRS reaching out to fix it. Partnering with a tax professional is always the best way to ensure that your claims and deductions are accurate.
While it is possible to report reasonable losses within your tax return, your reports should be in alignment with the total needed to support yourself. If you can’t appear to support yourself, IRS may decide to perform an audit to gather more details. In the event that someone else supports you, they may decide to audit them as well to gain clarity on the situation that is persisting.
But not too much money
The same way that claiming your income as lower than makes sense, the same goes for claiming more than is reasonable for your personal return. Making too little can draw unwanted attention, but making too much can do the same. Seems like you just can’t win when it comes to IRS.
Referencing back to #2 on our list, tax season is the time when you most want to seem invisible. Any deterrence from the normal thresholds poses as flashing lights to IRS and is likely to end up in an audit.
Ensure preparedness before getting started
IRS looks for easy wins to go after and audit. While the big-name businesses might be bigger fish for IRS to catch, they often focus on the smaller fish that they know they can catch. This might include looking out for taxpayers that make slight mistakes or discrepancies between the details of their W-2 or other various tax forms.
As such, it’s important to wait until you have all relevant tax forms ready for submission prior to beginning your filing process. Patience is key in making sure that your documentation is complete before moving forward with filing your taxes.
While estimations and rounding might work when measuring spices in the kitchen, it doesn’t work for IRS. If your expenses total $852.78, declare exactly that. Rounding down to $850 or up to $900 isn’t going to cut it.
IRS workers are people too. They shop at the same stores as the average person and know about as well as you and I do that normal transactions and purchases don’t often end in perfectly rounded zeroes.
Filing an amended return isn’t necessarily a bad thing. While it might not be ideal to have to resubmit an adjusted return, it’s significantly better than submitting an incorrect return, even if only slightly off. Submitting an amended return may be the difference between IRS deciding to perform an audit after identifying the issue themselves. If you recognize an issue in your tax submission, you’re best off doing what you can to make the necessary changes before IRS does.
If you think you may be at risk of experiencing an IRS audit, reach out to the Milikowsky Tax Law team today!