Here we are at tax season. Again. Hopefully, you’ve rounded up your receipts, figured out allowable deductions, and loaded all of that onto the proper tax forms. And if not, it’s not too late. You have time.
But this is not the time to get sloppy. Make sure you don’t run any of these red flags up the flagpole of your tax return and you will greatly reduce the chances of getting hit with the most dreaded of all tax events—the audit.
Double-check to make sure your arithmetic is correct. Math errors are not limited only to miscalculations. They could also be truncated numbers—dropping decimal places. Negative numbers need to have brackets around them. Consider attaching a spreadsheet or adding machine tape. Messed up math is the number one tax filing mistake so double-check everything. E-filing makes sure that math calculation errors don’t occur.
If you are self-employed your deductions need to be very carefully documented. As a member of this group, don’t be tempted to blur the line between personal and business expenses, especially mileage deductions and home-office usage.
Automobile logs are one of the most commonly audited items. If you take this deduction, make sure your records are detailed with a beginning and ending odometer readings, location and reason for the trip.
Charitable deductions that are more generous than the IRS’ average guidelines could give an auditor reason to pause. Taking deductions for large, non-cash contributions are particularly suspect. Be sure to have all receipts showing the date of donation, the receiving organization and the valuation of the donated items to document these contributions.
Wrong tax figures
If you are preparing your own taxes, be sure to pull the correct numbers from the tax tables. E-filing will automatically pull the right numbers, so this is something to consider if you are opting to go it on your own, without an accountant or tax preparation professional.
Incorrect ID numbers
The most common mistakes, according to the IRS, have to do with Social Security numbers. Make sure they are accurate and match the name(s) given. If you show dependents, you must include their Social Security numbers. Failing to include a dependent’s name and Social Security number can result in underpayment or being denied the Earned Income Credit.
Attaching the required documentation, such as W2s and 1099s is critical. All necessary forms and schedules should be included with the sequence order given in the upper right-hand corner.
Failure to sign
Be sure to sign your return (both spouses, if filing jointly) and make a copy of it and all supporting documents for your records. Remember, being audited isn’t always bad. Sometimes the IRS will discover they owe you money. If you E-File, you will sign your return digitally.
Receiving sizable refund
This is not a red flag to signal an audit, but it’s a sign that you’re making a colossal mistake. It means you overpay your taxes. Part of your paycheck goes missing every payday and you need to find it.
It makes no sense to overpay your taxes and then find yourself running to the credit cards because you can’t make your paycheck stretch far enough. Fix your withholding. And if you want that big annual refund, automatically deposit the difference to a savings account every payday.