Tax Mistakes That Can Trigger an IRS Audit

You've probably heard about the six most common Tax Mistakes That Can Trigger an IRS Audit. Do you want to avoid them? Here are some examples. First, don't forget to sign your tax return. Sometimes, well-meaning taxpayers forget to sign their returns, or they change the wording in their penalties of perjury clause. Even missing a form can land you in audit purgatory.

The IRS will often conduct an audit on taxpayers who are newly divorced, married filing jointly, or head of household. Self-employed taxpayers are also frequently targeted. This is because they haven't reported profits for three out of five years, and the IRS figures they're using that status as a tax dodge. Therefore, if you think you're in danger of an audit, there are a few things you can do to prevent it from happening.

Failure to file a return can also result in an audit, and an audit can result in a larger tax bill. You'll have to pay back the money you owe the IRS if you don't follow the rules. And if you fail to pay, the auditor will charge you a penalty of 0.5% of the amount owed. The fine can be as high as $25,000!

Another common mistake is not reporting 1099 wages. Even if your business reports its payments as 1099s, contractors sometimes forget to report their wages. Since the IRS knows about these payments, they can easily track unpaid taxes. Therefore, you shouldn't hide your 1099 wages because doing so may trigger an audit. Furthermore, most of the IRS' red flags are based on mean. For example, lower middle class taxpayers don't donate large amounts to charities. However, if you are a small income earner, you may need to explain how large your charitable donations are.

One of the most common Tax Mistakes That Can Trigger an IRS Audit is intentionally underreporting your income. Underreporting your income is a form of tax evasion and cheating. In a recent government study, it was found that self-employed restaurant owners, clothing store owners, car dealers, telemarketers, salespeople, and doctors are the most likely to understate their incomes. But, despite this, a study by the IRS showed that only 6.8% of deductions are overstated.

Another common mistake is making data entry or math mistakes. While these mistakes may not seem like a big deal, they can lead to an audit if the IRS suspects wrongdoing. While audits aren't the worst possible scenario, they are stressful for the average taxpayer. That's why it's always better to hire an experienced tax attorney who knows what to do. You don't want to get caught by the IRS and find yourself in a situation where you can't meet their demands.

Another common mistake is filing multiple returns. In some states, this is the best option to avoid audits. A simple mistake can cost thousands of dollars. Make sure you've kept all of your financial records for more than a year. Otherwise, the IRS will look for more suspicious activities and you could get into a much bigger mess. It's worth a shot. However, you'll be facing a lot of penalties if you don't file your returns on time.