[Hey, I’m doing another post exchange with another blogger. Today, that blogger is Jordan from Beer, Bacon, and Business; see his bio for more information about him. Look for my companion post on his site soon. Interested in doing a post exchange? Make sure you have your own active, personal blog and that you’re cool with me editing your writing, then contact me -Ed.]
Let’s face the facts here; taxes are scary!
Oh, you think you’re all tough and muscular? Do you even lift? I bet if I said the words, “tax returns,” you would whimper like a little baby in need of a diaper change. Say the words, “tax audit,” and that whimpering turns into full-on bawling.
No one wants the IRS snooping around, even if they have nothing to hide. IRS audits can be terrifying and statistically speaking, they’re pretty rare; only one percent of Americans go through that ordeal. Now that‘s a one percent you don’t want to belong to.
Wondering what makes you more susceptible to an audit?
Make one mistake in filing your returns, and you could have the IRS at your door.
Are you a big earner or have assets running into the millions? The IRS has got an eye on you.
Fudging your taxes? You should be especially worried.
Here are some things you can do to avoid tax audits by the IRS:
Report all your income
This one’s a must! Don’t think for a second that the IRS doesn’t know that you work two jobs.
Using either the W-2 and the 1099 form, account for everything that you earned, even if it’s gambling winnings (No, seriously; casinos have to report winnings to the IRS, so someone out there knows how you’ve been spending your time).
It’s especially true if you’re self-employed. Don’t cheat when it comes to your income, because you’ll have to pay a big price for it.
Have all your supporting documents in place
I cannot stress this enough. If you think that you qualify for a deduction, add the appropriate amount of paper work to justify it. Don’t just assume you’ll get one. Whatever your expenses have been, make sure that you have evidence to qualify it, be it spread sheets or your bank balance. Everything should be crystal clear and make sure that the IRS knows you have nothing to hide. If you have lost any important documents, you can use the 4506-T form to get a copy from the IRS.
Check and re-check your math
I understand that math is not everyone’s cup of tea. But it’s important that you have the right numbers, otherwise the IRS will come to you. If you think round numbers are easier to work with, then too the IRS might ask you for more specific numbers and supporting documents. If math isn’t a strong point with you and the likelihood of you making a silly calculation error is high, I suggest you go to a professional like Pershing Yoakley & Associates or 1800accountant.com. It will just make things easier for you and the IRS both!
It’s all about neat and clean returns
The numbers are illegible? Well then, isn’t it obvious that the IRS wants an explanation? File a decipherable return and you won’t have that problem.
Being too charitable might get you in trouble
Charity is great. A too large amount of charity which seems a little odd compared to your income bracket? Yep, the IRS will come after you because they know what average charitable amount is for people in your tax bracket. Proper paper work is everything. So, if you can prove that you are more charitable than the rest of us, then you’ve got no problem.
Business meals, travel and entertainment
Schedule C will help you get a good amount of deduction because it’s all just business after all. Ask for too much, and the IRS would definitely want an explanation. Be careful, especially if you’re self-employed. And again, details are all important!
So you have a hobby (And you make a profit)
If you bake cookies, your neighbors love to gorge on them and pay a good price for them too, and this has happened for three out of five years that you’ve been at it, it’s no longer a hobby my friend; this qualifies as a business and you have to pay the appropriate amount of taxes for it.
These are just some of the steps you could take to avoid an IRS audit. But don’t be too worried. Sometimes, all the IRS needs is a proper explanation. If you give them that, there won’t be a problem. Remember that proper documentation and timely filing of taxes will take you a long way.
All Rights Reserved. Jordan is the original Author and DebtBLAG.com is the authorized Publisher of this content. Unauthorized republishing of this content will result in violation of Copyright laws. Doing the same may lead to initiation of legal proceedings by the Author and/or Publisher. However, you are allowed to like, tweet, share or promote the article link in your network without prior permission.
Author Bio: Jordan Greer is a 28 year old entrepreneur and a former Business Developer. With an insatiable appetite for the good life, keeps himself current on topics related to technology, gaming and his first love, food. He shares his views on his blog posts hoping to provide valuable information to entrepreneurs like himself who wish to establish a successful business.