History of the Internal Revenue Service has shown that annually not 1 per cent of taxpayers in America are being audited. The number is expected to remain the same for this year. Keep in mind that some of the audits they have conducted are only chosen in random and the taxpayer did not do anything that could trigger them. There are also audits that are caused by red flags by the taxpayers. When this happens, those who have audit insurance will be prepared with the fees that might incur. Here are some common mistakes that taxpayers make which could lead to an audit.
- Do not overestimate amount of donations When a person donates, the IRS is giving a deduction as a form of motivation. Donations can be in the form of food, old vehicles and clothing. The only issue with this is that taxpayers are the one that states the value of their donations. In general, the amount of the deduction should range from 1 and 30 per cent of the original price of the donations. This is the safe range that is acceptable to the IRS.
- Errors in calculation are one of the reasons why IRS calls for an audit. It is advised that taxpayers should review their form and have it checked by their accountant for any mathematical errors. The smallest error could raise the suspicion of the IRS which could lead to an audit.
- One of the most common mistakes made by taxpayers is not signing their tax returns. The account will be more likely reviewed when this happens. This is an indication to the IRS that your signature might not be the only one you have forgotten.
- Not reporting their income in their tax return can be tempting but it is essential to include everything you have earned as well as the amount you received from selling an asset. In case you get caught, you will be ordered to pay not just the back taxes but the penalties along with the interest.
Tax collection will not be complete without an audit and having audit insurance can help you from paying fees.