Some foolish mistakes can invite an IRS audit for your business. The very thought of an audit can send shivers down your spine, especially when you have no idea what went wrong. The first thing to remember is that the purpose of an audit is providing proof of the information on your tax return to the IRS. Keeping the necessary documents ready should keep things on track.
Unintentional and silly mistakes are commonly made while filing tax returns. By knowing the common mistakes and avoiding them, you can minimize the risk of an audit down the lane. One way to avoid an audit is by hiring an accountant in Troy, MI. When you let a financial expert handle your finances, you can significantly reduce mistakes that trigger an audit.
Tips to avoid an audit letter from the IRS
- Enter your identifying information correctly.
Although it sounds obvious, usually, the silliest mistakes can cause an IRS audit. Not entering your social security number correctly or misspelling your name cause the IRS to reject your tax return. It is crucial to double-check the information you fill in because once your return is rejected, you will have to file again. Filing again thus means a delay in receiving a return.
- Report all income.
Do not try to deceive the IRS. Remember, the government is always one step ahead of you. Assuming that the IRS does not know about some of your income and not reporting all of your income can backfire. If you receive a form with an incorrect amount, you can send it back to get corrected. Even if you are a waitress who gets their tips in cash, the IRS can find out about those as well.
- Claiming home office deductions.
If you are claiming home office deductions, make sure you can justify them. Maintain appointment records of your home office and use your home office address instead of a PO box. Also, keeping the area of your home office below 20% square footage of your entire house is important.
- Minimize year-to-year differences.
The IRS may also suspect you of lying and conduct an audit if there are huge differences between the amount of taxes you paid in the previous years vs. the current year. A large difference stirs up suspicion and increases your chances of being audited.
- Hire an accountant.
Hiring an accountant reduces the chances of an error. If you are not confident about your taxing knowledge or math skills, you should get an accountant instead of stressing yourself about it. The work is done more accurately, and you also have peace of mind.