Don’t Raise Red Flags: Mistakes to Avoid on Your IRS Tax Return

Nobody wants to have to deal with an IRS audit, yet many people continuously make the same mistakes on their tax returns year after year, which raise the risk of an audit. Since many people think that audits are only for the rich, or else that they are 100% randomly generated, too many taxpayers don’t take steps to avoid getting audited, which is often a costly mistake.

The reality is, there are many things you can do to reduce the risk. Of course, you can’t drop that risk down to zero because there are a certain number of randomly generated audits each year. When you avoid mistakes, however, you can cut the risk down dramatically. The following are some common mistakes that are made, and how to properly avoid them.

Mismatches Between Filings & W-2’s or 1099’s

Many people get paid from multiple different sources each year, and will receive a W-2 or 1099 from each of them. Sometimes people file their taxes before they get all their documents, and end up missing one or more of them. This will cause there to be a mismatch between what the IRS received and what you filed. Even if it was just an honest mistake, it can often trigger a full audit.

Not Documenting Charitable Contributions

Many people like to donate money to charities. Not only is this a good thing to do to help others, but it can also help you to qualify for certain tax breaks. However, if the IRS sees that you are donating more than people generally do at your income level, it can trigger an audit. So be sure to document your donations carefully.

Failing to Report Foreign Accounts

There are many legitimate reasons for people to have a foreign bank account. Even if you don’t have to pay taxes on the money, however, it is important that they are reported so the IRS is aware of them. If you fail to report on them, it may cause the IRS to be suspicious and flag your return for an audit.

Having a Home Office

Of all the tax deductions available, one of them that is most often illegitimately claimed is the home office. When done properly, this deduction can save you a lot of money since you get to claim deductions for the square footage, electricity and many other expenses. The downside, however, is that the IRS often flags those who make this claim for an audit.

Doing everything you can to avoid an audit is always a good idea, but it’s impossible to completely eliminate the chance of being audited. If you are selected for audit, don’t panic! Contact a qualified tax professional who can guide you through the process.

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Written by Desnoyers CPA

Desnoyers CPA

Known for her friendly, outgoing nature and her rare talent for financial foresight, Lydia Desnoyers has been serving individuals and small businesses in Florida since 2010. After earning her Master’s Degree in Accounting from Nova Southeastern University and her Bachelor’s Degree in Accounting from Florida State University, she became a Certified Public Accountant and a Certified Fraud Examiner.