For many Americans, the middle of April is decidedly not the most wonderful time of the year. The traditional April 15 tax deadline can be a stressful time for many reasons. Sometimes it’s because you owe money, but even if you get a refund, putting together the documents you need to file a return or claim deductions can be a lot of work. There’s also the question of IRS scrutiny of your tax return. Most people fear having their tax returns audited and it can happen to anyone. Once the shock wears off, keep in mind that you can get through an audit. Storage Quarters helps clients manage documents, even through audits. Here is what you need to do if your taxes are audited.
Whose Taxes Gets Audited and Why
Getting audited does not necessarily mean that the IRS thinks you did something wrong. According to the IRS website, some audits are the result of random selection or you can be audited if you were involved in a transaction with somebody who was randomly selected for an audit.
There are times that the IRS will audit you because they believe there’s an issue with your return. Some issues can seem minor, but still cost you, while others can be more serious. Nerdwallet lists a few factors that can trigger an audit –
• Math Errors—Make sure your numbers are correct and then double and triple check them. Even if a math error is unintentional, you can still face fines. Also be careful of using too many round numbers. If you claim a $95.25 business expense, round it to $95, not to $100.
• Claiming Too Many Losses and Deductions—Be careful with your business expenses. If you report too may, the IRS might start to think you’re mingling business with personal expenses. In order to claim a business expense, it must be an ordinary expense related to your line of work. Be careful with the home office deduction. You have to use your home exclusively and regularly for your business to claim this.
• Failing to Report Income— This is a big one. If you did some freelance work in addition to your regular job, don’t forget to submit it to the IRS. They already have a 1099 form with your income.
• Claiming Too Many Charitable Donations—You need to be able to document your donations. If charitable donations which are deducted are too large compared to your total income, that’s a red flag.
Taxpayers on the high or low end of the income scale, meaning those who earn less than $25,000 or more than $200,000 tend to be audited more often than those in the middle.
What to Expect from an Audit
The Motley Fool says that more than 75 percent of audits are conducted by mail. Sometimes you may have to appear in person, usually when a detailed explanation is required. In some extreme cases, an IRS agent can come to your office.
Wherever your audit is held, you need to be prepared. That means bringing all of your records. You’re entitled to representation at the meeting with a lawyer or your tax preparer. Be polite, don’t be too argumentative, and certainly don’t be rude. Only bring up information that’s relevant to what you’re discussing or you could open yourself up to an expanded investigation.
Storage Quarters Can Help You Stay Organized for Tax Season
If you’re being audited or if you’re trying to avoid an audit, you need to be organized. Storage Quarters has document management services that can give you better control of your records. We can scan and digitize all your documents and we offer secure shredding services for the documents you don’t need. To get a free quote or book our services, contact Storage Quarters today.