Tax season is here once again. Keep these common mistakes and pitfalls in mind when filing your tax return to avoid a visit from the Internal Revenue Service.
Accurate Income Reporting
The income reported on Form W-2 and Form 1099 needs to match the income reported on your return. Inaccurate data can lead to a call from the IRS. Hire third party inspection services to prevent any mistakes that can lead to an IRS audit.
Unusual Charitable Deductions
Charitable donations that are considerably higher than average donations for your income bracket can raise questions.
Unusually Low Salaries
The IRS looks closely at S corporations and shareholder compensation, which is reported on their personal tax return. If the stated salary of a principal owner looks suspiciously low, the IRS will want to look into that.
Incorrect Social Security Number
Be sure to avoid this simple pitfall. Double check your Social Security Number and make sure it’s correct. Believe it or not, it happens. Avoid the headache of re-submitting a rejected e-filed return over a mistyped number, and if you’re hand-filing the return, make your social security number is clearly legible.
Claiming Losses from “Hobby” Activities
Certain types of businesses showing losses, such as horse racing or horse breeding, will often generate increased attention.
Claiming a Different Alimony Amount than Your Ex-spouse Claimed
If the amount of alimony deduction or alimony income you’re reporting is different than the amount your ex-spouse claims you’ll run into trouble. Remember to include the Social Security Number of your ex-spouse when you report your alimony deduction, this is a must.
Excess Meals and Entertainment Expenses
Considerable expenses on meals and entertainment for certain businesses will raise questions. Keep careful track of business expenses for accurate annual reporting.
Source: Most Suspicious IRS Audit Triggers Accounting Today via The Minnesota Society of CPAs