Tax Mistakes that Can Force an Audit

No one wants to face a tax audit. Even if you’ve tried your best to be honest and to keep everything on the “up and up,” it is still a stressful experience that most of us just don’t have time for.

And, while there is no surefire way to protect yourself from an audit (some of them just happen randomly), there are things that you can do to greatly reduce your chances of being audited.

To begin with, make sure you don’t commit any of the “major mistakes” that can easily end in an audit.

Hiring An Unscrupulous Tax Preparer

Many people try to protect themselves from errors and auditing by hiring a professional to prepare their tax returns.

And, while this is usually a smart choice, you do have to be careful to hire someone who is honest, scrupulous, and who knows what they’re doing.

If you hire the wrong person, meaning someone inexperienced and prone to mistakes or, worse yet, someone who lies to get higher returns for his clients, you could find yourself in a bad situation.

If the IRS notices that a particular preparer is making a lot of mistakes or being dishonest, it may decide to audit every person who has had a return filed by that individual. Obviously, you do not want your name on that kind of list, so choose your preparer wisely.

Filing the Wrong Forms

One easy way to end up getting audited is if you file the wrong tax forms for your situation. When you make this mistake, the IRS may wonder what else you’ve done wrong and decide to investigate with an audit.

Of course, some forms, such as a Schedule C, which is required for businesses, just increase your chances of an audit no matter what. In these cases, it’s important to work with a knowledgeable tax professional to ensure you’re filing these forms correctly and that you have protection and an advisee you can turn to if an audit does occur.

Taking Excessive Deductions or Credits

Finally, deductions and credits are wonderful things that can end up saving you a lot of money on your taxes.

With that said, though, if you take a lot of them, this could trigger an audit, particularly if the deductions and credits look a little suspicious, like when you’ve been “entertaining” one too many clients.

By all means, take the deductions and credits you are eligible for, but do so honestly and make sure you keep careful, documented proof of the fact that you were allowed to take them.

If you can follow these tips, you can reduce your chances of being audited or at least survive if an audit does happen to you.