What do you need to keep in mind while filing your tax? The most essential thing is to avoid mistakes in order to know how to avoid IRS Tax audits. To ensure you need to do the following:
Reasons for Getting Audited
Once your filing is done, cross check it carefully to spot errors. In 2001, the IRS spotted 2.7 million math errors. This figure was double to that in the preceding year. The most common mistakes include inaccurate computation or claiming wrong exemptions. Common errors arising due to lack of understanding include claiming earned Income Tax Credit, the Child Tax Credit, standard or itemized deductions. Those who file with First-Time Homebuyer Credit mostly end up committing many inadvertent errors. Errors which can be avoided include spelling names correctly and miss-quoting the social security number.
How Does The IRS Choose Who To Audit? Know your audit odds.
What sort of activities can put you at risk of an audit? High earning groups are likely to invite audit if they commit mistakes while filing returns. About 12% of those earning nearly $1 million faced an audit in 2011. So, if you belong to this category, tread carefully. Again if you are Schedule-C filers earning between $100,000 and $200,000 you might stand a high chance. In 2011, about 5% of Schedule-C filers were audited.
How to avoid an IRS audit
The best way to avoid returns is to ensure there are no wrong deduction attempts.
- These include quoting home loss, exaggerated moving expenses and including medical deductions for needless cosmetic surgery.
- Parents adopting children invite scrutiny the most. About 70% of returns claiming adoption credit were audited in 2011. It is also important to avoid being victimized by tax fraud.
- Fraudulent refund claims and payments may land you in a soup. Once you fall into their bad books for doing this, there is no escape whatsoever for the rest of your life.
- Safeguarding personal information like a person’s Social Security number is of paramount importance. Impostors can use your number to divert the refund check into their account.
That’s why it makes sense to file tax early and not give crooks to steal what rightfully belongs to you. All it takes to avoid tax audits is a little care on your part.
Image Curtsey: Forbes.com