It would be difficult to find a soul in this country who does not dread the idea of an IRS tax audit. Then there are those who have endured this ordeal and survived to narrate the tales of pure horror and torture, now even though some of these tales have an element of truth to them others may be slightly exaggerated, yet the fact remains that an IRS audit is certainly not a situation that you want to find yourself in. The IRS reserves the right to audit the earnings and expenditures of individuals or businesses at any point. The only good news here is that the IRS can only muster up enough time to audit about 1.5% of all tax returns in the country. However, it is best to take certain precautionary measures to avoid an IRS audit.
One of the simplest ways to keep the hassles of an IRS audit at bay is to ensure that you report all your income regardless of its source. Whether you are an employee, business owner or an independent contractor it is imperative to be meticulous when filing your taxes. The IRS guidelines explicitly mention the types of income that need to be mentioned. If you have any ambiguity about your income, get in touch with a Dallas attorney and ensure that you know about your earnings that need to be reported. You will not only have to declare your salary but also other forms of earning such as tips in your tax returns.
Also, ensure that you have all the relevant documents with you to support the facts provided in your tax returns. If need be, you should be able to prove everything that has been listed. As an employee, you will have to rely on your employer to prepare the W-2 or the 1099 form; this will have information about your income you have earned in the previous year while you were working for a particular company and other such pieces of information. When filing your taxes, ensure at the number in your W-2 are the same as the entries in your tax returns.
Simple mathematical errors also have the potential of raking up lots of trouble, so it is imperative to ensure that your taxes are calculated accurately. Since the IRS uses an automated system, it takes them a few seconds to spot such errors and even though it may have been a genuine mistake, it will certainly put you on the IRS scanner which is what you don’t want. Make sure that you double check every entry on your tax return documents. Sometimes errors occur because the wrong entries have been entered in the wrong line, ensure that you check the entries and the lines they are on. If the mathematical calculation of your tax returns is sloppy, the IRS will be inclined to believe that you have been equally careless in the other areas of your tax return which can often be ground enough for an IRS audit.
A blaring mistake which is often committed by independent contractors and business owners is declaring their house a home office. According to taxation laws, for your house to qualify as a home office, a part of the property will have to be dedicated to the sole purpose of conducting business. In other words, you can’t treat your dining room as your office and expect a tax deduction. If you are not careful and simply claim for home office deduction, you may invite the IRS’s attention. Also, you cannot declare more than 20% of your house as the home office. This means that any deductions of expenditures such as rent, mortgage payments, utility bills etc will be limited to 20% of the amount.
Au contraire to popular belief the IRS is not out to get you, however, you should be honest with them. If you are unsure about a particular regulation, seek advice from a Dallas tax attorney to avoid IRS issues in the future.
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