But if you did everything correctly on your return, you should be able to prove that you are paying all taxes owed. If this is the case, the IRS will then agree with you and leave your return the same, and the audit will be over without any fines or any worries about tax evasion.

Rest at ease knowing there are ways to avoid audits altogether. We’ve listed the top audit triggers and reasons the IRS will send you correspondence, how to know if you’re in the wrong, and what proof you’ll need to ward off a full-blown audit, penalties, and frankly, unnecessary frustration.

1. Reporting the wrong taxable income

You can’t lie on your federal income taxes, because both you and the IRS received your W-2 and 1099 forms, for both full-time employees and self-employed individuals.

Acceptable: Reporting all income received.

Not OK: Estimating or fudging how much you’ve made, even if you’re a freelancer.

The proof you need: Compare the W-2 or 1099 you receive against your own records. If you think it is wrong, inform the sender and ask them to file a corrected W-2 or 1099 with the IRS. Report all taxable income you receive, even if you don’t receive a 1099 or other document.

2. Huge donations with a small income

The IRS may flag your return if you’re giving away large charitable donations when you don’t have much income.

Acceptable: You gave a generous donation to a meaningful charity of your choice … and then suddenly lost your job, making your income lower than expected.

Not OK: Fibbing charitable deductions or even giving to charity and not getting proper documentation for your charitable donations.

The proof you need: Get your large noncash donation worth $5,000 or more appraised, file Form 8283for any donation over $500, and make sure you keep all related receipts and documentation to support your charitable donation.

6. Math errors

It seems obvious, but we can’t leave it off the list because it’s one of the top reasons for audits.

Math errors: Simple tax mistakes like small mathematical and clerical errors, such as transposing digits or typos, inconsistent entries, or missing taxpayer identification numbers. When a math errorhappens, the IRS will often propose corrections to your return and send you a letter telling you how they propose to fix these and often proposing to assess additional tax, penalties and interest.

Not OK: Claiming the wrong deductions and credits, filing under the wrong status and stating the wrong income.

The proof you need: Double and triple check your work before filing and, again, keep meticulous records and proof for deductions and credits to avoid being required to file an amended tax return or letting this error affect your IRS refund. Other tips to avoid errors include filing electronically and double checking amounts you enter on the return.

Get more tax guidance

Learn how to handle an IRS audit or get trusted help. In fact, you can also outsource any type of audit to an experienced tax pro. Learn more about TOLF Tax & accounting services

The IRS 1099 Form is a collection of tax forms documenting different types of payments made by an individual or a business that typically isn’t your employer. The payer fills out the form with the appropriate details and sends copies to you and the IRS, reporting payments made during the tax year. In some instances, a copy must also be sent to your state taxing authority. The payer is responsible for filling out the appropriate 1099 tax form and sending it to you. Such payments can be for rental income, earnings working as a freelancer or independent contractor, a tax refund received from your state or locality, gambling winnings, and more.  Most 1099 forms are required to be provided by January 31, but in certain instances, this date is February 15.

Examples of when you might get a 1099 Form

Some common examples when you might receive a 1099 include:

• If you earned $600 or more in nonemployee compensation from a person or business who isn’t typically your employer, you should receive a Form 1099-NEC
• If you earned $600 or more in rent or royalty payments, you should receive Form 1099-MISC
• If you received a state or local tax refund during the previous year, you should expect to receive Form 1099-G

Likewise, if you paid a freelancer, independent contractor or other nonemployee $600 or more during the year related to your trade or business, you likely should send them a Form 1099-NEC.

Who sends 1099 forms?

Several types of 1099 forms exist to document payments made between an individual or business and another party. Because 1099 forms record payments, many people can receive various 1099 forms for different reasons.

One of the most popular 1099 forms is the 1099-NEC for Non-Employee Compensation payments. For example, if you’re an independent contractor or freelancer, you may receive a Form 1099-NEC documenting payments made to you throughout the year from a particular payer.

Non-Employee Compensation payments below $600 don’t require filing the 1099-NEC, though the payer may still choose to do so.

When should you expect to send or receive 1099s?

There are different due dates for different types of 1099 forms. For example, Form 1099-NEC, which is typically used to report payments to you if you’re an independent contractor or freelancer, is due to you by January 31st. If January 31st isn’t a business day, then the due date moves to the next business day.

If you’re the one sending 1099 forms:

1. Most 1099 forms are due to the recipient by January 31st.
2. If you’re mailing a paper form to the IRS, you typically must send the 1099 by February 28(postmarked by that date).
3. If you’re using tax software like TurboTax to send the forms to the IRS, we’ll import the information for the form for you, and you have until March 31 to e-file it, which means e-filing a return will give you more time to prepare the form than mailing a paper form.
4. Forms 1099-NEC are due to recipients and to the IRS by January 31 regardless of whether they are electronically or paper filed.

Payers must send you these forms early in the tax season to allow you time to prepare your tax return and allow the IRS to have evidence of how much income you earned during the tax year.

Despite the early due dates for sending these forms as a payer, you won’t need to file your own tax return until the tax filing deadline.

The early due dates to send 1099s to the IRS helps them detect refund fraud more easily by verifying income that individuals report on their tax returns. Most 1099s need to be filed with the IRS by February 28th if sent by mail or March 31st if e-filed.

What to do if you don’t get all of your 1099 forms

Even if you don’t have the appropriate forms, you’re still responsible for paying the taxes you owe. If you didn’t receive a 1099, you need to report the income received on your tax return in order to avoid a bill from the IRS for owed taxes and possible penalties.

If you haven’t received all of your 1099s by the January 31st or February 15th deadlines, contact the person or business responsible for sending you the 1099. Request that they send you a copy of your 1099 so you may file your tax return on time.

With TOLF, work with a tax expert who understands independent contractors and freelancers. 

While audits are rare, most Americans would probably like to avoid them altogether. The percentage of people who actually are audited is extremely small, according to the Internal Revenue Service, but the number has risen slowly since 2008. If the IRS does decide to audit you, there is little you may do to stop it. You may, however, reduce the odds that you will be singled out for that extra attention in the first place.

1. Check your figures

One of the most common red flags for auditors – erroneous data entry – is also one of the most preventable. It seems simple enough to follow the advice to “double-check your return,” but surprisingly, people are often too careless regarding their taxes.

In some cases, taxpayers make avoidable mistakes by forgetting about income or related forms they’ve received when filing.

• A good practice is to wait for all your income reports, bank and investment statements and other applicable financial paperwork to arrive before starting your tax return.
• Correctly reporting dependents and exemptions, as well as ensuring that the numbers match, is also important. The IRS’s automated system will easily detect discrepancies, and it won’t be obvious whether or not a discrepancy is accidental or on purpose.

2. Honesty is the best policy

Perhaps it’s common sense, but being 100% truthful on your tax return is an absolute must to reduce the chances of an audit. Realistically and accurately reporting income, deductions, credits and other figures can help keep an audit at bay.

• In general, you should be prepared to look an auditor in the eye and support any number you claimed on your return.
• Self-employed filers, for example, should have receipts for every business deduction they claim.

3. Go vanilla

The largest pool of filers – which consists of individuals or joint filers who earned less than $200,000 but more than the lowest earners – tends to avoid overt scrutiny.

You’re more likely to be audited if you make more than $1 million a year or you’re in a very low income tax bracket. Both categories historically are fertile grounds for fraud and – because of the greater complexity – mistakes in data entry.

• High earners typically take more deductions, such as for charitable contributions, and are more at risk of being audited.
• Taxpayers filing Schedule C are more likely to be questioned.
• If you don’t own a house or have children and you make a modest income, there is virtually no chance you will be audited, unless you’ve made a mistake on your tax return or your deductions are abnormal.

4. Realistic deductions

Unusual or unrealistic itemized deductions, either for individuals or small business owners, may raise a red flag for auditors. For example, claiming a charitable tax deduction for 40% of your total income could raise some eyebrows at the IRS.

If you’re a sole proprietor and you file Schedule C, which details profits and business expenses, reporting losses for three years or more could encourage an auditor to request proof that you’re actually in business.

If you’re itemizing deductions on Schedule A, it pays to know what constitutes a legitimate tax deduction. Daily commuting to your regular job, for example, is not a legitimate deduction.

TOLF can help you determine what tax deductions you qualify for. We’ll ask you simple questions about your tax situation and search over 350 tax deductions and credits to help you make sure you get all the tax breaks you deserve.

5. E-filing helps

On Jan. 24, 1986, the IRS received its first electronically filed tax return from a preparer. By 1990, taxpayers throughout the country who expected a refund could file electronically. Out of over 155 million individual tax returns received by the IRS in 2018, 138 million were e-filed. The IRS maintains that filing returns electronically can prevent mistakes and lower the odds of an audit.

• The error rate for a paper return is 21%.
• The error rate for returns filed electronically is 0.5%.

Few and far between

The word “audit” fosters trepidation in many people, but in reality the deep-tissue audits people tend to envision are fairly rare.  According to the IRS, of the nearly 154 million individual returns filed for calendar year 2017, about 1 million were audited.

In the most common federal audits, taxpayers receive notices from the IRS asking about certain details of their returns and requesting further information or clarification. This is known as a “correspondence audit,” and even those are considered as rare as being struck by lightning.

Most of the papers you need to document the income, interest and withheld taxes you report arrive in your mailbox in January, with investment-related 1099s often coming in February. Although the postal service may deliver some of them—your W-2, for example—email announcements that the documents are available online may land in your inbox.

Mortgage providers, banks and other financial institutions often post those important 1099 forms on your online account. So it’s a good idea to create an email tax folder for messages relating directly to tax information.

Track paperless records as they come

Paperless banking may have turned shoe boxes into receipt relics of the past, while your online statements often contain key backup records for potential deductions such as:

• Charitable donations
• Outlays for health care
• Gambling winnings and losses
• Property tax expenditures include for your auto.

Many of us ignore the line items from these statements until we start our annual tax-filing ritual. But you may save time by taking a few extra minutes each month to jot down tax-related information including:

• Expense title
• Check numbers
• Payee names
• Dollar amounts
• Dates

Create a spreadsheet dedicated to tax records. Throughout the year, consider downloading and printing online documents that will be available for only a limited time.

Think deductions throughout the year

Keep a mileage log in your car. Jot down the miles when you use your vehicle for:

• volunteering
• work
• business or medical appointments

Keeping track of parking, bus and taxi fares and tolls can also help you qualify for a deduction.

Hold on to cash receipts that document your transportation, charitable work and other tax-deductible activities. Hold on to any paperwork and documents that arrive in the mail, or receipts needed to prepare the return, even if you’re not sure. It’s always better to have too much information than not enough.

Life events you experience

Documents related to life events should all be saved, such as records of:

• marriage
• death of a spouse
• divorce
• deductible alimony payment records
• adoption papers
• child custody agreements

A newborn brings joy into your life and potential tax advantages. When you sit down to prepare your return, have these documents for dependent children close at hand:

• Social Security card
• Childcare receipts
• Contributions to college savings plans

Buying a home presents tax-saving opportunities. New homeowners should keep paperwork such as:

• Closing documents
• Home improvement invoices, receipts and proof of payment
• Annual mortgage statement

It’s good to keep your closing documents in case you paid real estate taxes or points when you closed that don’t appear on your year-end mortgage interest statement. Home improvements such as wheelchair ramps recommended by a doctor may be deductible as medical expenses if you itemize deductions. Certain energy efficiency improvements also may help you reduce your tax liability.

Remember, when you use TOLFL to prepare your taxes, we’ll ask you simple questions to ensure you don’t overlook any possible deductions.

Keep your filing history

The value of a tax return doesn’t end on the day you file it. You’ll likely need to provide this document to get a mortgage, apply for student loans and to check the status of your refund on the Internal Revenue Service’s “Where’s My Refund?” web page.

Generally, the IRS can audit you for three years after a filing date, and in some cases even longer, so hold onto your return copies and supporting documents just in case. The IRS can audit you as many years back as they would like if it suspects fraud, so keeping tax returns and supporting documents for at least seven to 10 years can put you on the safe side.

File your own taxes with confidence using TOLFL. Just answer simple questions, and we’ll guide you through filing your taxes with confidence. Whichever way you choose, get your maximum refund guaranteed.

• January 16, 2023 – 4th Quarter 2022 estimated tax payment due
• January 23, 2023 – 2022 Tax season begins
• January 31, 2023 – Employers send W-2s forms to employees
• January 31, 2023 – Send certain 1099 forms
• March 15, 2023 – Taxes are due for some business types (partnerships, multi-member LLCs, and S-Corporations). Businesses organized as partnerships, including multi-member LLCs, and S-Corporations need to file Form 1065, or 1120S by March 15, 2023, if they are a calendar year business. If your business uses a fiscal year, you need to file your tax return by the 15th day of the third month following the close of your tax year. For example, if your business uses an April 1 – March 31 tax year, your business tax return would be due June 15 instead of March 15.
• April 18, 2023 – Taxes for C-Corporations are due. Businesses organized as C-Corporations need to file form 1120 by April 18, 2023, if they are a calendar year business. If your business uses a fiscal year, you need to file your tax return by the 15th day of the third month following the close of your tax year. For example, if your business uses an April 1 – March 31 tax year, your business tax return would be due June 15 instead of in April.
• September 15, 2023 – Deadline for extended partnership and S-corporation returns
• October 16, 2023 – Deadline for extended C-corporation returns
• January 15, 2024 – Fourth quarter 2023 estimated tax payment due

If you have a business that operates on a fiscal year basis, your return is typically due on or before the 15th day of the third or fourth month (depending on the type of business entity) after the close of your fiscal year. In instances where this due date falls on a Saturday, Sunday, or legal holiday, the due date is moved to the next business day.

There are several important dates taxpayers should keep in mind for this year’s filing season. Individual Filers – including employees, retirees, self-employed individuals, independent contractors, and gig workers.

• January 16, 2023 – 4th Quarter 2022 estimated tax payment due. If you’re self-employed or have other income without any tax withholding, and you make quarterly estimated tax payments, this is the due date for your final quarterly payment for the 2022 tax year.
• January 23, 2023 – 2022 Tax season begins. This marks the first day the IRS will begin accepting and processing 2022 federal tax returns.
• January 31, 2023 – Due date for employers to send W-2 forms. To ensure you’re able to complete your tax return on time, the IRS requires all employers to send you a W-2 no later than January 31 following the close of the tax year. Generally, this means W-2s get sent by January 31, but you won’t necessarily receive your form by this date.
• January 31, 2023 – Certain 1099 forms are sent. Various 1099 forms, and forms 1099-NEC,1099-MISC, and 1099-K are used to report payments that typically don’t come from an employer, such as if you work as an independent contractor, gig worker, or self-employed person or if you receive income such as interest, dividends, prize winnings, rents, royalties, or brokerage account transactions. If January 31 falls on a weekend or holiday, these forms are due to be sent the following business day.
• February 15, 2023 – Reclaim your exemption from withholding. If you chose to claim an exemption from your employer withholding taxes from your paycheck last year by filing a Form W-4, you’ll need to re-file the form by this date. You would file this exemption request if you anticipate having no tax liability this year and had none in the previous year.
• April 3, 2023 – Required minimum distribution due if you turned 72 in 2022. If you turned 72 in 2022, you have until April 3, 2023 to take your 2022 required minimum distribution (your first required distribution) from your retirement account. After passage of the SECURE Act in 2019, if you turned 70 years old on or after July 1, 2019, you don’t need to take RMDs until you reach age 72.
• April 18, 2023 – Tax day (unless extended due to local state holiday). The tax deadline typically falls on April 15 each year, but can be delayed if it falls on a weekend or holiday. Missing the tax deadline can have consequences like penalties and interest.
• April 18, 2023 – Deadline to File Form 4868 and request an extension. The tax day deadline is also the last day to file Form 4868 requesting an extension to file your individual income tax return. If you won’t be ready to file your tax return by tax day, make sure you instead complete an extension request, granting you the ability to delay filing a completed return until October 16, 2023. But remember, even if you choose to file an extension, you are still required to pay any taxes you may owe by the April deadline.
• April 18, 2023 – Deadline to make IRA and HSA contributions for 2022 tax year. For individual income tax return filers, this also marks the final day to make contributions to your IRA or HSA for the 2022 tax year. After this date, you generally can’t make contributions for the previous tax year.
• April 18, 2023 – First quarter 2023 estimated tax payment due. Making estimated tax payments means that you need to estimate how much income you’re likely to make for the year and determine how much you will owe to the IRS for income taxes. You can use IRS Form 1040-ES to calculate how much tax liability you’ll have for the year. IRS Publication 505 contains all the rules and details you might need to know about how to calculate this amount. If you overestimated how much tax liability you’d owe for a year and are due a refund, you can choose to receive that money now or apply the overage to the following year’s quarterly tax payments.
• June 15, 2023 – Second quarter 2023 estimated tax payment due. Despite the IRS referring to these payments as quarterly estimated taxes, the due dates don’t necessarily fall within “quarters” nor do they each represent three months of tax payments. They represent an equal quarterly share of your estimated income tax liability paid at uneven intervals. The first payment occurs 3 and a half months into the year. The second payment is five and a half months; the third payment is eight and a half months, and the fourth payment is due 12 and a half months after the year starts.
• September 15, 2023 – Third quarter 2023 estimated tax payment due.
• October 16, 2023 – Deadline to file your extended 2022 tax return. If you chose to file an extension request on your tax return, this is the due date for filing your tax return.
• December 31, 2023 – Required minimum distributions must be taken for individuals age 73 or older by the end of 2023. After taking your first RMD (for 2022) by April 1, 2023 if you turned 72 in 2022, you also need to take your 2023 RMD by the end of the year. This is also the deadline if you are otherwise required to take an RMD for 2023.
• January 15, 2024 – Fourth quarter 2023 estimated tax payment due. This represents the final quarterly estimated tax payment due for 2023. If you choose the option to pay 100% of your previous year’s tax liability, any unpaid taxes will be due when you file your 2023 individual tax return by the April 2024 deadline.