I was once asked if I would report all the earnings this website made, even if they weren’t reported to the IRS, and the person asking was surprised when I said ‘yes.’ The reason why I said yes was in part because I think everyone should pay their fair share in taxes (I don’t make six figures, so you can’t put me in the ‘rich and hate taxes’ crowd) and because what I would gain in cheating is mere microfractions of what I’d lose if I were caught doing a little extra fudging. Cheating didn’t pay in school, it sure doesn’t pay now.
That being said, you can be entirely on the up and up and still be audited. An audit doesn’t mean the IRS thinks you’re evading your taxes or trying to pull one over on wizened Uncle Sam… it just means something on your return doesn’t add up and they want to know why. You have a 1 in 107 chance of being audited and a 1 in 63 chance if you bank more than six figures. Here are some tips on how to avoid being involved in a uncomfortable ‘misunderstanding’ meeting with the IRS.
The two biggest mistakes people make that trigger a closer look are (can you imagine these?):
- Failing to sign
- Using wrong social security numbers
Ask anyone and you know that those two aren’t in the MO’s of tax cheats… but they’ll still trigger problems for you. (In fact, I would venture to guess most cheats go to extreme measures to ensure it’s not one of those two reasons that get them caught)
There are some other red flags that pop out too that are worth mentioning:
- Unreported income
- Itemized Deductions
- Casualty Losses
- Hobby Losses
For more information, please visit this resource page on audits on taxadviceday.com .