In two weeks, on April 15, the Internal Revenue Service will want his money.
Tax day is a stressful, frustrating day for most people, but not for those who are notified just down the road that their tax return has been selected for an IRS audit.
Here’s the good news: audits are rare. The IRS audit rate dropped to just 0.38% of all returns in 2022. And the most common causes of an audit can be avoided if you take your time preparing your return, even if that means filing for an extension .
Make sure you have all your forms, especially your 1099 if you have a part-time job.
And, as obvious as it may sound, don’t artificially increase your deductions. The IRS compares the withholdings you make to those of taxpayers who have a similar profile to you. If they are out of reach, it can increase your chances of getting a note.
(Most audits are conducted by correspondence, although more rare in-person audits still occur.)
You also want to avoid simple mistakes that could cause the IRS to flag your return. These are the most common, according to the IRS.
Reporting too early. This goes back to the mantra: don’t rush. Wait until you are sure you have received all your tax return documents before filing.
Missing or incorrect social security numbers. Check these again to avoid headaches.
Misspelled names. If the information listed does not exactly match the information on your Social Security card, it could trigger an audit.
Inaccurate information. Be especially careful when recording the amounts of wages, dividends, bank interest and other income.
Incorrect filing status. Do not check ‘head of household’ if this is not the case. Not sure if you qualify for status? Consult an accountant.
Mathematical errors. Simple addition and subtraction can be less easy for some people. Always double-check your math, or (even better) use tax preparation software to do so.
Calculating credits or deductions. Figuring out things like the income tax credit, the child and dependent care tax credit, and the child tax credit can be confusing. This is another case where tax software can help.
Incorrect bank account numbers. Check both the routing and account numbers.
Unsigned forms. If you do not sign the return, it is not valid. In most cases, this also applies to your partner.
Notorious tax advisors. Don’t rely on anyone who isn’t a true tax professional. The Tax Authorities can help you find someone who can prepare your tax return.