Double Checking Can Lead to Fewer Errors
Author: Keith Huggett
The IRS makes a lot of money on tax audits. In fact, one survey of IRS audit personnel who focus on corporate returns indicates that they generate more than $9,000 in revenue for every hour they spend reviewing returns. To ensure your tax return avoids attracting the scrutiny of audit-happy IRS employees, don't make these simple mistakes:
- Math errors: The IRS uses powerful computers to check your return, and if you make an error, you can expect a letter.
- Discrepancies with information returns: Believe it or not, the IRS used to accept your return without matching it to 1099s and other information returns. That isn't the case any more. Today, the IRS checks your return against every information return that carries your social security or employer identification number, and if they find a discrepancy, you will probably end up enduring an IRS audit. There is a lot of information available about 1099s and you may be under the impression that 1099s don't apply to you. Check it out just to be sure.
- Too many deductions: The IRS has a good sense of how many deductions a normal return for your income level and type of business will have. While they allow for some variation, if you claim too many deductions, they will flag your return for audit.
- Illegitimate home office deductions: Many of the people that claim home office deductions claim them illegitimately. Because of this, even if you are entitled to it, claiming it makes you a target for an IRS audit. Before filing for the deduction, make sure that you are really allowed to claim it. If you are, it's probably worth the risk, especially when you include the depreciation allowance against the value of your house.
