The vast majority of tax returns pass through the IRS smoothly. In fact, less than 1% of tax returns sent within a year end up being audited. While your odds of not being audited are very high, there are a few factors that make you extra susceptible to it. What are your chances of being audited? What makes the IRS look closer at your tax return? Find out now.
Why Does The IRS Audit People?
The IRS is owed a certain amount of money, and the IRS receives a different amount of money. They conduct the auditing process in order to narrow the gap between those two figures. Many of these audits are conducted at random, but taxpayers viewed as suspicious are put on the frontlines. The IRS is not likely to waste their time auditing you if they don’t think there’s money to be had at the end of it all.
How Does The IRS Choose Who to Audit?
We’ve all made simple mathematical mistakes before, it’s impossible to avoid entirely. But preparing your tax return is not the day for it. If you’re completing your own tax return, check your numbers, then check them again. There’s no room for rounding, guessing, or leaving out a zero when it comes to taxes. Whether your simple mistake benefits you or the IRS, it’s going to draw attention to your return. That’s what we’re trying to avoid.
Don’t leave out any applicable income. If you received a 1099, so did the IRS. They know exactly what to expect from you. So when your tax return comes back without addressing the 1099, they’re certainly going to want to know why. Make sure that any income that should be on your tax return is on your tax return. If you’re lacking the funds to pay your taxes, it’s easy with self-employment, gig work, and freelance work to try and ignore it. But that only leads to owing larger figures in the end. Be upfront and honest about your income, it will pay off in the end.
Keep business finances and personal finances separate. This general rule benefits you on multiple fronts. First, allowing your business expenses and personal expenses to intertwine is only going to draw a lot more attention to your return. Second, it makes things so much easier for you. Digging up specific details on past bank statements is going to be significantly easier when you’re searching through a few monthly business transactions, rather than your personal spending. Even if your business isn’t its own entity just yet, use separate credit cards, bank accounts, and so forth.
Best Tax Preparation in California
The best thing you can do to protect yourself from a potential audit is to work with the experts. While a tax preparation software can guide you step-by-step through the filing process, it’s not going to correct a number that you’re unsure about. Working with a CPA means your taxes are getting the attention you need. Contact us today for professional tax preparation.