They are five letters that can strike fear in the heart of any taxpayer: A-U-D-I-T. One of the most common questions that we get as accountants and bookkeepers is “What can I do to avoid getting an audit?” Luckily there are a few answers to that question.
At Hacker Accounting, we know how to keep your taxes in tip-top shape. If you worry about receiving an audit, come see us and we’ll put your mind at ease. If you’re filing your taxes on your own and are wondering what you can do to avoid being audited, here are a few important principles to keep in mind.
Check Your Math
One of the biggest red flags for auditors is also one of the easiest to prevent: Incorrect data entry. Ticking the wrong box or writing in the wrong number in a certain field could come back to haunt you. Keep in mind that the IRS can’t tell the difference between a genuine mistake or a purposeful omission. It’s in your best interest to ensure that your forms are completely filled out and accurate. Double-check your math, and if you have any reservations at all about how your taxes are turning out, speak with a professional. A visit to our offices could save you from an audit.
Don’t Play The Guessing Game
Another common mistake people make is that they don’t wait to get all their information in order: They end up estimating their income and statements and filling out their taxes with guesswork. Sometimes people are driven to do this because they lose their W-2 or don’t get the right reports in on time. You really shouldn’t do your taxes until you have ALL the paperwork you need. Make sure that you have your income reports, your W-2s, your bank and investment statements and all relevant financial paperwork with you before you do your taxes.
Worst case scenario: If you don’t have all the paperwork that you need, file for an extension. The IRS makes it easy to apply for one, so long as you request it before your tax due date comes round. You’re better off getting an extension and doing your taxes properly then try to rush them in to make the deadline.
When it comes to doing your taxes honesty IS the best policy. Report all your income. All of it. Don’t try to conceal anything or round down your figures. Give an honest and open accounting of your finances. If you file your taxes and later realize you made a mistake, get in touch with them and make the necessary corrections. Don’t wait around and hope they won’t notice. They WILL notice and it will be a red flag for an audit.
Be Reasonable With Your Deductions
Nothing will attract an auditor’s attention faster than filing with a lot of deductions. Make sure that every deduction you take is something that you can back up later with receipts and paperwork, if called upon to do so. And make sure that you’re deducting things that you can actually deduct. It can be easy to mistake personal expenses for business expenses, especially if you’re an entrepreneur who runs their own business.
Sign Your Returns
This may seem like a minor and obvious point, but you’d be amazed at how many people forget to do this. Make sure that you ALWAYS sign your returns. Any forms that you send the IRS should be signed. If you don’t sign a form, it can make the IRS wonder what else you forgot to do in your forms. It shows a lack of attention to detail which makes you a prime target for an audit.
Looking for more ways to keep yourself audit-free? Give Hacker Accounting a call at 602-375-5251.