It is tax season again, and with it comes the fear of being audited by the government. The Wall Street Journal recently posted a list of 10 tips that can help you avoid that problem. We are posting five of them below. Are you ready for the tax season to begin?
1. Choose your tax return preparer with care.
If the IRS believes a preparer is claiming unwarranted deductions or taking other fraudulent steps on clients’ returns, then the preparer’s clients are at risk for audit.
2. Report all of your income.
IRS’ computers compare information on the forms with the income reported by taxpayers on their returns. If the information doesn’t match, this leads to an automatic audit.
3. Provide complete information.
All questions should be answered and all required information should be included on the forms and schedules necessary for your return.
4. Avoid claiming deductions that are audit red flags.
There are no official audit red flags. While many warn that claiming a home office deduction can prompt an audit, there’s no proof of this. If you meet the qualifications for claiming a home-office deduction, there’s no good reason not to take the write-off.
5. Don’t file certain forms or schedules.
Some optional forms and schedules virtually guarantee an audit. If you have loss years, be prepared to prove that you are operating the activity with a profit motive.
Photo by Alan Cleaver