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Five Mistakes That Increase Your Chance Of Getting Audited

Most people will never be audited by the Internal Revenue Service. However, if you make a mistake while efiling your taxes, then you have a higher chance of being audited. Below is a list of mistakes that may trigger an audit:

Math Mistakes

It is estimated that there were 2.3 million math errors on tax returns in 2013. That is why it is a good idea to double-check all of the calculations before you submit your tax return. You should also make sure you put the data in the right box. Electronically-filing your taxes and using tax preparation software can decrease your chance of making a math mistake. You also want to make sure that you sign your returns. An unsigned tax return can also trigger an audit.

Not Reporting 1099 Income

If you are a freelancer or independent contractor and your income exceeded $600, then you will get a 1099 form. You will have to report this income. Some independent contractors and freelancers make quarterly tax payments. Other people pay their taxes once a year. The Internal Revenue Service wants to make sure that the income is properly reported.

Keep in mind that the business or employer has already sent a copy of the 1099 to the Internal Revenue Service. Therefore, even if you do not report it, then Internal Revenue Service will already know. You may be audited if you do not report this income.

Omitting Important Information

If you omit important information, then this may trigger an audit. Even if it is something that seems insignificant, such as a dividend payment, you should still report it. Not only is this the right thing to do, but the IRS already knows that you made the payment anyway.

It is important to remember that anybody who pays you has probably already reported the payments to the Internal Revenue Service. That is why you should make sure that you report all important information to the IRS. If you are doing your taxes yourself, then it is a good idea to have a professional look over your forms to make sure you have included all of the necessary information.

Too Many Deductions

If you have your own business, then you may be entitled to certain deductions. However, excessive deductions may trigger an audit. Many people who have a home office claim their part of their mortgage or rent payment and utility bills as business expenses on their tax return.

However, there are requirements for claiming your home office as a business expense. The home office must used be exclusively used for business purposes. The deductions that you are able to get may not be that large. You will not benefit from claiming a lot of expenses on your tax return, and it may also make the IRS suspicious.

Not Filing A Return Or Reporting No Income

If you do not file a tax return, then you may be contacted by the Internal Revenue Service. They may think that you are trying to hide your income. Even if you do not owe any taxes, you will still need to file a tax return. You will have to prove that you do not have any taxes due.

If you file a tax return and report that you do not have any income, then your chances of being audited are even greater. For example, you are a business owner and you report a net loss, the Internal Revenue Service may check to make sure that you are being truthful. It is estimated that 5.3 percent of tax returns with no income were audited in 2014.



This post first appeared on 7 Practical Ideas For Living Within Your Budget, please read the originial post: here

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Five Mistakes That Increase Your Chance Of Getting Audited

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