What strikes fear into the hearts of American Taxpayers? If you’re thinking along the lines of “IRS” and “tax audits”, then you are absolutely correct. Let’s be honest. Somewhere along the line, we’ve all heard of IRS audit horror stories that have left a stark reminder that filing a tax return isn’t something to be trifled with. That’s why when it’s time for people to start filing tax returns, the process often goes hand in hand with stress, exhaustion, and a lot of calls for tax services in Kearny, NJ and everywhere else. After all, no one wants to have the IRS questioning them any time soon. To help ease off the stress, there are ways to find out if you’re at risk of getting audited. Read on to know more.
Filing a tax return requires a delicate balance of honesty, meticulousness, and keen eyes. But even with all of those, you can never be completely confident that you won’t get audited. To help you know if you’re at risk of tax audits, take a look at the list below.
- Filing an Error-Filled Tax Return
If there’s one big red flag for auditors, it would be filing an error-filled tax return. Of course, there are others, but this definitely raises your risk of getting audited. Then again, you’re human, and who doesn’t make errors on bad days especially when you’re exhausted and you just want to sleep, right? Luckily, there are professionals you can rely on for tax services in Kearny, NJ, so you won’t have to do everything yourself. And because they are professionals, they are more likely to check and recheck everything to make sure that there are no errors.
- Making a Lot of Money
We’re not saying that you should make less money. After all, who doesn’t like making a lot of money, right? But the odds of getting an IRS audit rise significantly if your earnings are high. The IRS statistics for 2019 show that people with incomes between $200,000 and $1,000,000, who filed a Schedule C, had a 1% audit rate (1 return audited out of 100). Schedule C or Form 1040 is used to report loss or income from a profession you practiced or business you operated as a sole proprietor. If your income is even higher than $10,000,000, you will have a significantly higher chance of getting audited. If your report reflects that you have no gross income, however, you will also have a higher chance of getting audited. That’s because the IRS wants to make sure that you really have no gross income.
- Being Self-Employed
What this means is that being self-employed can bring with it a host of opportunities for making mistakes. When you are self-employed, you are often busy which means you may tend to forget a lot of things. For example, if you are a freelancer with a lot of clients, you need to make sure that every 1099 form is properly accomplished. If you miss one, you may get into a lot of trouble. You also need to be careful with deductions because the IRS is actually much stricter about what you can deduct.
There are many more ways to tell if you’re actually at risk of getting audited. They can be passing off a hobby as a business, reporting too much cash donations, not reporting all of your taxable income, taking higher-than-average deductions, and many more. If you want professional help regarding this matter, reach out to Nicholas J. Coco, CPA and he will guide you. Better yet, hire him for his accounting services in Kearny, NJ to make sure that you are in the clear. Browse through our website to get to know him and what he can do for you.