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Mistakes That Increase Your Chances of a Tax Audit
Reduce your tax audit chances by avoiding these mistakes
When it comes to the IRS, there is no way to completely audit-proof your life. You can, however, protect yourself and reduce your tax audit chances. There are three key mistakes that people make when preparing their tax returns that can increase the chances that they will be called in for a tax audit. When you understand what you can do to reduce the likelihood of a tax audit, you will in all probability feel some measure of relief.
Mistake #1: Handwritten tax returns
Handwritten tax returns are a red flag. Especially if they are sloppy. A sloppy return tells the IRS that you may not have taken care when preparing your tax return. There are a variety of online tax preparation services that can help you fill in tax forms using the computer. You can also buy tax preparation software to help you accomlish this. Professionally prepared and computer prepared forms receive less scrutiny than hand prepared tax forms. However, if you feel that the cost of such programs and services is too high, then write neatly on your form. Get two copies of each required form, and then fill one out first and make corrections on it. Then, when you have it right, copy the information neatly onto a fresh form. Do not cross out answers. Use white-out or get a new form. You can print forms for free on the IRS Web site.
Mistake #2: Using round numbers
Many people feel silly writing something like $698.57 on their tax forms. Some just round it up to $700. However, this is a mistake that could result in an audit. When a tax form has numbers that seem to come out round every time, that alerts IRS workers. It tells them that your record keeping may be shoddy, and that you may be estimating instead of figuring out the actual numbers. On many state tax forms, you are asked to round the numbers. But never on a Federal tax form. Put in the dollars and the cents to show that you are exact.
Mistake #3: Using the IRS-provided label
This one is a rather common mistake. However, the IRS label gets you into the system faster. And the first people into the system are more likely to find themselves audited. If you are expecting money back, the idea of being in the system quickly is great. After all, it means your return is processed more quickly. But being processed more quickly also means that there is more time for someone to look over your return and look for possible mistakes.