No one looks forward to an audit by the IRS. If the IRS decides to audit you, there is very little that you can do to stop the audit, other than talk with a professional accountant to assist you. It may be a stressful time, but all of this can be avoided by ensuring that you’re taking the proper steps now, so that you can avoid an IRS audit later. Let us help you get organized.
Check Your Figures
Erroneous data entry is one of the most common accounting errors, yet it is the most preventable. People are often careless about their taxes and they do not double check their returns. To avoid such errors, it is advisable to wait for your income reports, investment and bank statements before you start your tax return. Simple things like correctly reporting dependents, as well as exemptions and also ensuring that your numbers match are important. It’s also a good idea to check for simple mathematical errors that you might make innocently.
Report Realistic Deductions
Reporting unrealistic deductions, whether as an individual or as a business owner might raise a red flag with the IRS. When you make donations of items, such as clothes, it might be difficult to determine the actual value of your donation. Some other donations that you should pay attention to include:
- Mileage to perform charitable services
- Education and research expenses
- Interest paid, such as mortgage interest
This is very subjective, since it is up to the taxpayer to determine the value of their donation. According to the IRS, the individual value of items donated should be between 1% and 30% of the purchase price. Many taxpayers are not aware of this or they might just ignore this fact.
Report All of Your Income
While it might be tempting to exclude some income from your tax return, it is not advised. It is very important that you report all income, whether from work or from selling an asset, such as a home. If the IRS discovers that you are not fully reporting your income, you will have to pay back taxes and penalties and interest accrued in the period.
Keep Accurate Records
If you have extensive files or records for the year, the higher the chances of escaping an IRS audit. If you seek to claim a huge deduction, make sure you have documents to back your claim. This especially goes for large amounts, since the IRS will pay more attention to discrepancies of higher values. For example, if you claim that your car is 100% for work. If you make such a claim, ensure that you have a mileage log to back you up.
If you’re chosen for an IRS audit, be sure to always be honest with the auditor. Hiring a qualified accountant who is well-versed in IRS tax audits can make your experience much easier. Give the experts at Bodine Perry a call at (855) 851-8318 or visit www.bodineperry.com.