The Happy Homeowner: A Personal Finance Blog: Tax Audit Red ...

The IRS estimates that 20-25% of all tax payers wait until the final two weeks to file their tax returns each year. If you're one of these people, you need to make sure to take your time in an effort to avoid costly last-minute mistakes.

The three most common last-minute filing mistakes are math errors, incorrect SSNs, and failure to date (and sometimes sign!) the return. Most of the time, these errors will result in a delay of your return and additional paperwork. But what if you make an even worse mistake? What if your mistake leads to the dreaded audit?? Below are some of the most common "red flags" when it comes to tax audits.

1. Carelessness. Forgetting to sign your return. Forgetting to date your return. Writing/typing the incorrect Social Security number. Believe it or not, these are common mistakes! And they can be avoided...simply by. taking. your. time.
2. Math errors. As with the careless errors above, math errors can seem simple enough but can equate to one heck of a headache if they trigger an audit. Considering this is perhaps the most common source of audit-inducing fodder, make sure to double and triple check those numbers. If you rely on tax prep software? Sure, those numbers are crunched for you but the machine has no idea if you're actually typing in the correct numbers to begin with. Slow down your efforts just enough to ensure you're entering the correct data and you can save yourself weeks or months of wasted time in the land of audits.
3. Hand-writing your return. Unfortunately, there are no bonus points awarded for going "old school" when it comes to filing your tax return. In this tech-driven age we live in, it's no longer widely accepted to hand-write your return. While this is one of the smaller audit triggers, why give the IRS any reason to suspect your return? Even if you don't want to pay for tax software, you can still download forms that can be filled out on & printed from the computer. This is an easy way to prevent an audit!!
4. Giving, giving, and giving some more. It's certainly a great to give back to charity whenever possible, but it's not acceptable to fudge, inflate, or fabricate those numbers when it comes time to do your taxes. Even if you're simply donating old clothing to Goodwill, if you claim your donation to be over $250 in value, you best be prepared to have an itemized receipt showing the figure (bonus points for also including photos, which I always have just in case). The IRS will look at your donation-to-income ratio; claiming to give away half of your income when you make less than $50K is a sure-fire way to raise the auditing eyebrows.
5. Filing a business return. If you are a sole proprietor/small business owner, be prepared for increased tax scrutiny. Expense to income ratios are reviewed with fine-tooth combs, businesses are questioned as being merely hobbies, and anyone who already has a stable income from other work are all pieces of the business filing puzzle. There are many, many more so make sure to do your due diligence as well as reporting your income/profits accurately.
6. Super-sized deductions. This mostly applies to the use of one's home or car for business purposes, but it can expand to literally 100's of deductions. A few key points are that in order to deduct your home office or car expenses, your office and car must be used only for business purposes. Therefore, you can't deduct kitchen expenses just because your desk is built into a nook in that room. Also, make sure to accurately report your mortgage interest and property taxes as those are also hot-beds for audit triggers.
7. Rental property losses. In order to take these deductions, you must be able to prove that you are actively involved in the management of the property. Taking these types of deductions on top of having a decent, stable income elsewhere raises the auditing eye as much as taking super-sized deductions does.
8. Taking the Earned Income Credit. Much like the First Time Home-Buyers Credit of a few years ago (which I was able to take advantage of when purchasing my condo...wahoo!), there is a great deal of fraud surrounding the EITC. By all means take the credit if (and only if) you qualify, but know that this may potentially cause a greater likelihood of being audited.
9. Under-reporting income. This is more for those of us who receive 1099s as those are the most commonly under-reported sources of income. This one fascinates me in particular because I can't understand why someone would risk this given there's an actually document floating around out there reporting your income and the entity that paid you is also reporting it!
10. Flapping your gums. Did you know that the IRS has a Whistleblower Program that awards up to 30% of any extra tax/penalties to the person who turns in a tax cheater? Did you also know that the majority of cases originate with a friend, close colleague, or family member turning someone in? While you shouldn't be trying to cheat the system in the first place, you surely shouldn't be running your mouth about doing so if you choose to cheat on your tax refund.
11. Failing to file. Yes, it can be daunting to be faced with a huge tax bill. But when you realize that penalties and interest begin accruing immediately after the filing deadline of any given year, you shouldn't ever opt to simply not file. Instead of sticking your head in the sand and praying for this tax nightmare to disappear (which it never will because the IRS will hunt you down even if it takes them 10-15 years to do so), figure out your options. Get a filing extension, sign up for a payment plan; do whatever it takes to avoid additional taxes, fees, and eventual wage garnishment.
12. Past audit experience. Unfortunately, if you've been audited in the past, you'll likely remain on the IRS' hot list for years to come. Brace yourself for extreme scrutiny of your returns for at least 3-5 years following the year of your audit.
13. Being part of the 1%. This is one of the areas where being rich isn't a great thing. Simply stated, the more you make, the higher the likelihood you're going to be audited, especially in recent years.
14. Hiring a shoddy preparer. If you're paying someone to do your taxes for you, that isn't a green light to simply sit back and wait for your refund. If that person isn't asking for necessary documentation or asking you questions, you should be leery of their ability to correctly file your return. Unless they've known your/your family for decades and are privy to every bit of your financial information, you should be taking part in an interactive conversation about this year's return. You'll surely stress a lot less if you spend time answering your tax prep professional's questions rather than the tax man's!

When did you file your taxes? Did you receive a refund or did you owe this year?

? ?

great expectations masters winner 10 year old gives birth detroit tigers carmelo anthony c. difficile nurse jackie