Less than one percent of Americans’ tax returns will be audited this year, and while some are done at random, many taxpayers trigger their own audits. To prevent your number from coming up, consider the below “red flags” that can convince the IRS to take a closer look at your return. By paying attention, you can reduce your chance of an Audit in Galt CAat least for this tax year.
Overestimating Donations
The Internal Revenue Service encourages us to donate to charity, by offering a tax deduction for each donation. However, this system leaves valuation of goods up to the taxpayer. The IRS likes for taxpayers to value goods at somewhere between 1-30% of the original price, but most of us don’t know that. To avoid an audit, ask an appraiser to draft a letter, or value your goods at an amount where a buyer would willingly purchase them.
Fuzzy Math
It may seem obvious, but many tax returns are audited for arithmetic errors. When you’re filling out your return or inspecting it after your accountant has done so, be sure everything adds up -;especially in capital gains and losses. Even a seemingly insignificant error can raise the suspicions of the IRS.
Underreporting Income
It may be tempting to leave out some of your income, but you should report all the money you make throughout the year. If you are caught failing to report income, you’ll be liable for penalties and back taxes.
Deductions for Home Offices
Unwarranted or excessive deductions can raise eyebrows at the IRS, as can deductions that are too large when compared with your income. Trying to write off household items as business expenses can raise suspicions. Only make deductions for items used in the course of business.
Having a Higher Income
There’s nothing you can do about this (except to take a lower-paying job), but those making more than $100,000 yearly have a much higher chance of an audit than those with lower incomes.
If the IRS audits you, you should respond to inquiries quickly and honestly, and be prepared with proof. If necessary, ask a tax attorney or Galt CPA to represent you with the IRS. Audits are an integral part of the tax process, but you don’t have to be chosen. To avoid an Audit in Galt CA, document everything, and be honest.
