As April approaches, thousands of people and businesses across Texas are preparing to file their federal income tax returns, a prospect that leaves many stressed, intimidated and annoyed. However, tax experts stress the importance of filing accurate returns to avoid making tax season even more stressful. A taxpayer whose return appears suspicious or error-ridden will likely be subjected to an IRS audit; one is found to be hiding income or otherwise trying to cheat the tax system could be targeted by liens, levies and wage garnishments or even an audit fraud case.
The best way to avoid a tax audit is simply to avoid making mistakes on one’s filing. For those who doubt their ability to perform the required math without errors, they should consider consulting a professional tax preparer or using an automated computer program to ease the filing process. The IRS will enforce fines against a taxpayer who submits a return with incorrect information, regardless of whether or not the mistakes are intentional.
Small business owners in Texas need to be particularly careful when claiming business expenses on their tax returns. All business expenses must be ordinary purchases and crucial parts of one’s work. Listing many expenses is an easy way to provoke an audit, though one who can provide evidence that each of their entries qualifies as a legitimate cost of doing business is unlikely to encounter penalties.
Similarly, many taxpayers claim an excessive number of charitable deductions in order to reduce how much they owe. Of course, making donations is a great way to qualify for tax breaks, but claiming contributions that were never made is likely to result in an audit. Most taxpayers deduct charitable contributions equally about three percent of their total income, so exceeding this percentage by a significant margin will attract the IRS’s attention.
Source: Fox Business, “Seven Reasons the IRS Will Audit You,” Stephen Vanderpool, March 8, 2013