Thehttp://www2.wspa.com/topics/types/organization/tags/internal-revenue-service/"> face="Arial">http://www2.wspa.com/topics/types/organization/tags/internal-revenue-service/"> face="Arial">IRS audited nearly a million and a half people last year. Scary right? Avoid the potential stress with these quick ways to help prevent the agency from reviewing you!
1. Check Your Math
Let’s say you claimed 100% of your medical expenses as a deduction, even though the tax forms state that you only may deduct the excess over 7.5% of your adjusted gross income. The math error could indicate a sloppy return, especially since the IRS computers automatically correct both mathematical errors and mistakes on the amount you can take as a deduction. Potential result: a full audit
2. Live Within Your Means
Even if you're not too rich or too poor, make sure your tax return accurately reflects your economic reality. Reporting that you made $75,000 in a year with two dependents (your spouse and child) – while in reality your annual income is $100,000 with one dependent (your child) – will not work. The IRS has a database of what it thinks it takes to survive based on where you live and the number of dependents you report. If your numbers are wildly different from those norms, it will question whether you are under reporting income or over reporting deductions.
3. Report all income
If you've ever used a software package to prepare your tax return, you may have noticed that the program constantly reminds you to enter the information on forms 1099 and W-2. The IRS makes every effort to match nearly 100% of the forms submitted to them by employers and other organizations. So if you quit a job after three months and figure you don’t need to report the income since it was for such a short time, you’re incorrect. If you fail to receive a form, follow up --ask your former or current employer(s) where your form W-2 is, just in case it got lost in the mail. You don't want to overlook income that should have been reported on your return, especially when the IRS is so thorough in its review.
4. Charitable Deduction Missteps
If you fail to include http://www.irs.gov/pub/irs-pdf/f8283.pdf"> color="#0000ff" face="Arial">Form 8283 for donations above $5,000, your chances of an audit spike. That means that original Monet painting you donated to the Smithsonian Museum needs to be recorded. And don’t forget: Donation receipts are a must!
5. Know When to File
If you have a big refund and are unconcerned with audit issues, file early and get your money back. If you have taxes due, and no penalty for underpayment, don't file until the official deadline. Don't ever pay a Federal tax bill before it is due. It's an interest-free loan to the IRS.