As tax season rolls along, Americans across the country are completing and filing their 2011 tax returns. Unfortunately, many of them will make mistakes. And those mistakes can often turn into every taxpayer’s nightmare: a letter from the IRS stating that their return has been selected for an audit.
Each year, hundreds of thousands of tax returns are audited—often leading to penalties, fees, and additional money owed to the government. And while many returns are randomly selected for audit, many others are selected due to a “red flag” that often indicates an error on the part of the filer.
To help you avoid this experience, today we are going to share five common mistakes that individuals and business make while preparing their returns. Don’t follow in their footsteps!
1) Mathematical errors. It should go without saying… but take the time to check your math. Even minor errors can have major repercussions for your return, and can trigger an audit. It’s just like you learned in elementary school… always check your work!
2) Insufficient documentation. It is essential that you document your deductions and, as a business owner, your expenses. The IRS can (and regularly does) demand to see documentation, and if you don’t have it, you’ll often end up owing additional money. It’s important to understand that it can easily take 2-3 years before you are contacted for an audit—so don’t throw your paperwork away!
3) Incorrect W-2 and 1099 forms. Whether you are an employee or a business owner / contractor, take the time to double check your W-2 and 1099 statements. These forms are provided to the IRS as well, so it’s not enough to simply correct the mistake on your return. Inform your employer or the business that provided you with the form and ask them to send you a corrected version.
4) Incorrect filing status. There are a number of different filing options, including single, married filing jointly, married filing separately, head of household, and more. Depending on your situation, the right filing status can save you thousands of dollars—while an improper selection is a major red flag for the IRS. Contact us today if you’d like to learn more!
5) Preparing a complex return without professional help. The bottom line is that the tax code is incredibly complicated. And to make matters worse, the IRS is often extremely inflexible. We have seen it happen time and time again—an innocent mistake on a tax return leads to a larger problem with the IRS, and at the end of the day the taxpayer ends up with a massive bill that he may or may not be able to pay. Don’t take this chance. Hiring a professional to handle your return will cost you a tiny fraction of the costs that a mistake could result in.
A mistake on your tax return may have dire consequences. However, the good news is that you don’t have to figure out the tax code on your own. Contact us today to learn more!