Look, it’s easy to make a mistake on your tax return. There are a lot of numbers to keep in mind and boxes to fill out. But, the IRS doesn’t take errors lightly, and a simple math error might result in an IRS tax audit. It’s best to double check your return and review it for errors before submitting it to avoid a fine.
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Claiming excessive charitable donations
If you're claiming a large sum in charitable donations
, beyond what seems doable for your tax bracket, it might raise some questions with the IRS and increase your chances of getting audited. This isn’t to scare you away from donating. The IRS actually encourages you to donate items like clothing, furniture or monetary contributions. But it’s up to you to determine the value of the donation, and claiming an amount too high could lead to an audit.
Taking the home office deduction
If you’re self-employed and working from home, you’re eligible for the home office deduction
. It’s best to use caution when taking this deduction, as it’s easy to deduct an excessive amount or try to claim something that’s not eligible.
For example, the chances of getting audited are high if you try to write off all of your home utilities. This is because only a portion of your utilities is tax deductible. The IRS will have some questions if you try to write off your new kitchen island or a recliner.
Not reporting income
It might be tempting to leave off some of your income from your tax return. As long as you don’t get caught, it won't cause any harm, right?
If you work as a teacher in a local school and tutor students in your local neighborhood in your spare time to earn a little extra cash, it might be tempting only to report the income from your local teaching job, but the income from your tutoring gig
must be reported, too.
Or, say you work as an accountant, and your hobby is painting. If you sell your paintings in local shops and galleries, you should report both the accounting and painting income on your tax return to avoid an IRS audit letter.
You should also report any asset sale, like a home or a stock. The IRS has been around long enough to know when someone might be underreporting their income. Doing so might get you an IRS notice for an audit and lead to a hefty penalty, plus interest.
Taking too many business deductions
Let’s face it. Everyone likes saving money, and taking deductions
is an easy way to save on taxes. But business expenses must be both ordinary and necessary to qualify. Your expenses must be ordinary relating to the business and not something over-the-top or, well, out-of-the-ordinary. The expenses must also be necessary in the sense that there is a need for the expense.
An ordinary expense for a freelance artist might include paints and paper, but a guitar for her studio might raise an eyebrow with the IRS. The paints and paper are necessary for the artist to complete her paintings, but a guitar isn't necessary for painting.
Surprisingly, many taxpayers simply forget to add a signature on their tax returns. Failing to sign your tax return will almost certainly result in an IRS audit letter. The IRS might also be left wondering what else you forgot on your tax return. You’ll need to send back a signed copy which could result in a late-filing penalty.