Worried about making a mistake on your taxes? We understand the stress it can cause. While we can help you navigate every step of your return, you may want to know what could trigger an audit, IRS notice, or other IRS correspondence. That doesn’t necessarily mean you’ve done something wrong, just that the return you filed has something that the IRS will want to look into deeper.
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
