The most annoying thing for a taxpayer is the IRS check. The best way to avoid this check is not to make silly mistakes which might attract the attention of the tax authorities.
Approximately 1% of the filed tax returns is checked by the IRS. Thus, the chance of catching an eye of a picky official is relatively small – that is, if you avoid making these mistakes.
1. Beware of scammers
If you turn to a tax specialist for help, make sure you choose a trustworthy professional.
The accountant has to be certified, so you can trust them. The professional you choose should also have a good reputation among the tax authorities.
Sometimes, the tax office publishes lists of the so-called experts you should avoid. However, if you do not have this information readily available, common sense should suffice. If an accountant promises you golden mountains of tax refund and claims that all of their clients got incredibly rich, you should not take their word for it. In fact, it is better to choose a proven professional, whose services you can turn to more than once.
2. Hobby is not a business
If you are a young entrepreneur and have recently started your own business, you should take extra care when filling out declarations. For example, imagine that your startup which opened three years ago still does not make a profit. This might mean that your case can easily interest the tax authorities, as they traditionally consider enterprises like this to be more hobbies than businesses.
In cases of consistent losses, it is best to check the ledgers and prepare the documents to justify your expenses.
3. Cash is hard to hide
If you work in the service sector where employees regularly receive tips, like bartenders or waiters, you should know: all tips should also be indicated in the tax return as income. If you are hiding them, you are breaking the law.
At the same time, it is important to understand that the tax authorities have a certain table of incomes that, in their opinion, should be received by the service personnel. Therefore, if your income differs from these tables, it might cause suspicion.
4. Avoid typical mistakes
The first and most important thing which concerns the IRS employees is the incorrectly entered Social Security number or mistakes in the entered details of the employer (employer identification numbers).
Before you submit your tax report, make sure to check all the mathematical calculations twice (and even better, thrice).
5. List all revenues
Sometimes, problems arise when income specified in the tax return does not match the data received by the IRS from the employers.
How can this happen?
The company for which you worked did not send you the W-2 or the 1099 reporting form. Hence, you did not indicate it in your declaration, because this information was unavailable to you.
Do not expect that the company has not reported to the IRS about your earnings. Even if the company is closed, it has to write off these costs.
So if you have not received the required documents regarding your income, do not waste time, just call the company where you worked and ask to send you a report.
In case this does not get you the result, report this problem to the IRS, and they will be glad to help you.
6. The IRS often checks people with high income
Sometimes, high returns become the main reason to run a check.
According to CNBC, taxpayers with incomes of a million dollars and above are checked 12 times more often than people with incomes of less than 200,000 dollars. Therefore, the chances of checking are much higher when your income is high. For this reason, it is best to check the availability of all necessary financial documents and the correct way of filling out the declaration in advance.
But if you are still elected to be the object for verification – do not despair. A check like this does not always mean that you something is wrong. Just answer all the questions in the conversation with the IRS officials, and try to provide them with all the required documentation.
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