The word “audit” strikes fear into the hearts of many, especially if you find tax preparation confusing and stressful to begin with. Being audited simply means that the IRS or your state will double-check your tax returns to find potential discrepancies, but no one wants the hassle and stress of being audited. The reason for audits is to close the “tax gap,” which is what the IRS believes they should be receiving versus what they actually do. If you have been honest on your tax returns, you have nothing to worry about, but if you’ve been gaming the system—or even if you’ve made a simple mistake—that could come back to bite you.
Below are the main reasons the IRS might audit you. If you want the peace of mind that comes with avoiding IRS audits in Jamestown, ND, call Craig S. Hanson, CPA. We’ll make your life easier—and if the IRS comes calling, we can offer you support and representation:
- Math errors: Oops! You never were all that great at math—or you wrote a number down wrong. Whatever the cause, math errors are a red flag that can result in an audit, as well as various penalties. Make sure you double-check the numbers, and hire a professional if math isn’t your strong suit.
- Not reporting income: You might be tempted to keep your freelance income all for yourself, but trust us—the people who hired you will be reporting that money. Make sure you list every source of income you have, including tips.
- Too many charitable donations: With significant charitable donations come deductions, but if you overreport, the IRS will notice. Don’t risk it.
- Too many losses: If you’re self-employed, avoid the temptation to deduct personal expenses as business expenses. If it seems like your business couldn’t possibly be staying afloat, that will raise red flags.
- Deducting too many work expenses: If you want to claim an expense as a deduction, it must be both ordinary and necessary to your line of work. Business dinners are one thing, but deducting caviar tastings should be reserved for chefs.
- Claiming a home office deduction: If you have a home office, it must be exclusively used for work—that is, you can’t claim that your couch and laptop are your “office” unless you truly only use them for work.
- Using round numbers: Whatever you do, round to the nearest dollar, not the nearest ten or hundred. Otherwise, you’re asking for the IRS to demand proof.
Avoid IRS audits by hiring a tax professional
Tax time can be frustrating and confusing for anyone—it pays to seek out tax preparation services that will leave you with complete peace of mind. At Craig S. Hanson, CPA, we make things simple by offering preparation and e-filings for your individual, corporate or estate tax returns at the local, state and federal levels, so you can get any refunds back as quickly as possible. We also provide constant updates, answers to your tax-related questions and audit support and representation. Call us today to avoid tax audits in Jamestown, ND.