IRS audits have been on the decline in recent years as a result of the reduction in IRS enforcement personnel. According to the IRS’s 2017 Data Book, the IRS audited just over 900,000 individual tax returns, or about 0.6%, of all tax returns filed in calendar year 2016. This puts the odds of all individual taxpayers being audited at about one in 160. As good as that sounds, the number is meaningless if you are selected for an audit.
Keep in mind that higher income taxpayers have a higher audit rate. The good news is there are steps that you can take to reduce your chances of being audited by the IRS even further. Contact East Coast Tax Consulting today to learn more about possible Boca Raton IRS audit defense.
1. Avoid Math Errors
One of the most common errors taxpayers make when filing their returns is math errors. These errors will get the attention of the IRS computers and possibly cause an audit. You can reduce your chances of making math errors by enlisting the help of a professional tax preparation specialist.
2. Pay Close Attention to 1099 Forms
If you’ve received a Form 1099, so has the IRS – so they’ll notice if there is a discrepancy. The matching process is done by the IRS computer, and it automatically sends out letters to taxpayers whose numbers don’t match with Forms 1099 and other documents sent to them.
3. Separate Business From Pleasure
Self-employed individuals should exercise caution when writing off business expenses that may be considered personal expenses. The IRS takes a close look at automobile expenses, meals and entertainment, and home office deductions. Taking 100% auto usage or excessive home office deductions can result in an audit.
4. Don’t Guess at Deductions
If you itemize deductions of any kind on your tax return, you should make sure that you can accurately document those deductions to the IRS and they are in line with your income. If you guess at these amounts — especially if you list the amounts in neat, round numbers — this could indicate to the IRS that something is amiss.
5. File Your Return Electronically
There are several benefits associated with filing your tax return electronically, such as getting your refund faster and reducing your chances of making errors. The IRS estimates that the error rate for e-filed tax returns is less than one percent, which is significantly lower than that for paper returns. Fewer errors on your tax return means lower chances of being audited.
Learn More About Boca Raton IRS Audit Defense
If you are facing an IRS audit — or you suspect that your financial circumstances put you at a high risk of being audited — you will need professional IRS audit defense. Contact the tax consultants at the East Coast Tax Consulting Group by filling out our online form or calling us at 866-550-7655.