It’s tough to think about but every year I in 100 taxpayers who make less than $200,000.00 a year get audited. The reason it’s so high is that, over the last several years, the IRTS has been upping the ante, trying to get back some of the millions of dollars that is annually lost to taxes that are not paid on time or not paid properly. With that in mind we have for you today a slew of Tips for avoiding the IRS like the plague. Take a look and make sure you keep them in mind this tax season.
First, be careful with ‘professional’ tax preparation services. The fact is, if you make less than $51,000.00 a year you can get your taxes taken care of for free. If you use a pro make sure you thoroughly check all their credentials so that you’re sure they are on the level.
If you have hobbies that cost a few bucks but they aren’t related to business be careful trying to write them off. The IRS only considers something you do a business if it has made a profit during 3 years out of the last 5 years.
The Wall Street Journal reported that people who are self-employed and file a Schedule C have a 10 times greater chance of getting audited than someone who has incorporated. What that means is, basically, that incorporating is a good idea
Avoid really big deductions, especially charitable deductions that, in comparison to your pay, look big. The rules that the IRS follows say that, generally, half of your gross income can be deducted but, as the deduction gets bigger the rules start to change and the chance of a deduction increases.
Take your time and double check all of your figures. Also make sure that your signature, your Social Security number and all the data on your return is error free. This can help avoid an audit and also get you your return check a lot faster.
If you make over $200,000.00a year then be prepared to get audited at least once. With this knowledge in mind always make sure that you are prepared for an audit because, frankly, you know its coming.
The Earned Income Tax Credit for low income families is a refundable tax credit, which means that even if you didn’t pay in this year you still get the money. That being said it also makes this credit ripe for abuse so be careful what you deduct.
Filing your return electronically is not only possible now but also recommended. In fact, the chance of getting audited if you e-file is less than a regular filer so, if you can do it, you should. (And you can.)
Finally, be careful with your State tax return as well. The feds and the states communicate on tax return info and, if you get audited by the IRS you will most likely get audited by the state you live in also, another good reason to make sure that your Federal Income Tax return is flawless.