With the tax season knocking on your door already, many of you must be experiencing the fear of tax audit. CPAs, bookkeepers, and individuals are all glued to their tax software hosting to finish filing the taxes before time. However, the good news is- what is done is done. The best that individuals and business owners can do now is to be prepared in case a trigger sends the IRS to their door.
What Are The Chances That You’ll Be Audited?
IRS knows everything, and more likely than not, they will catch hold of any trigger that you will leave on your tax return. But, that doesn’t mean you will be audited. Your chances of audit increase with the number of risks on your filed return. Thus, inviting an IRS audit is a game of multiple factors, rather than one or two loose ends.
If you are sure your mistakes(if any) will be minimal and you are good with your documents, your chances of earning an audit are fairly slim. But that cannot be taken as a liberty. You still need to ensure that you will not be audited. Using a tax software such as Lacerte Cloud Hosting, ProSeries Hosting Solutions, etc can be of great help. Here’s how you can use your tax software to save yourself from being audited:
Use A Hosted Tax Software
Tax filing is a complex task. Errors can occur in many unexpected ways. There can be calculation errors, missing inputs, rounded up numbers, and many more issues. Switching to Tax Software Hosting such as Drake Cloud or Lacerte Cloud can make your process error-free and stress-free.
If you honestly wish to avoid getting audited, the most simple and straight way is, to be honest. Do not mess with the figures. If your receipts are not an even number, do not make it so. Keep your records up and running so that in case IRS begins to question, you have your receipts speaking for you. Produce real numbers only.
Hire A CPA or A Professional Accountant
Apart from Tax Software Hosting, hiring a CPA or a professional accountant will help make your tax filing easier. Although hiring a professional is not a guarantee that you will not be audited, he or she can at least help to avoid errors and produce answers for you, just in case.
Do It On Time
On-time means your tax return should neither be late nor should it be early. Your tax software hosting will allow you to prepare your taxes in less time, but that doesn’t mean you file them early. This way, you are only giving IRS extra time to go through your tax return in detail.
What Else Do You Need To Keep In Mind?
Apart from the key pointers mentioned above, here are some other red flags that need to be addressed while you prepare your taxes this tax season:
Do Not Count Your Work-From-Home As A Part Of Your Home Office Deduction
If you work from home, it does not mean you have a functioning office at home. A lot of people often confuse work from home with ‘Home Office Deduction’. These are two different things and care should be taken while mentioning them on your return.
Your 1099s From Multiple Clients Need To Be Reported
If you are a contractor receiving 1099 form from two or three clients, you are good. But if you have multiple clients sending you 1099s, do not forget to report them.
Know If You Are Calling Your Hobby Self-Employment
Working part-time as a hobby does not qualify as self-employment. You may be baking cupcakes occasionally for sale or selling lemonade with your kids, but do not call it self-employment.
Charities Over $250 Need to Have A Receipt To Be Considered
IRS is quite strict about charitable contribution deductions. Charities above $250 will be considered, but not without proper documentation validating the charity amount.
A lot of people try to hide their actual incomes. Reporting an income which is far less than what other similar businesses have reported, can bring you under the limelight. IRS has a good understanding of how businesses perform and a wide difference in your actual and reported income is a huge red flag. The best way to avoid unnecessary attention is to report everything.