The IRS deadline for filing your tax return for 2011 is rapidly approaching, which means more people are becoming concerned about receiving that dreaded audit. Recently, we mentioned how the IRS is increasingly turning to so-called unreal audits (“Audits may not be commonplace, but they are not rare either,” Feb. 23) in which the agency informs taxpayers of errors in their returns by way of letter. Yet, no matter the type of audit involved, there are some things California taxpayers can do to reduce their chances of having to deal too closely with the IRS.
First, it is important to realize that not all taxpayers have an equal chance of being audited. Overall, the odds are roughly 1 in 100 for those who earn less than $200,000 per year, but those odds can vary depending upon the nature of the return. For instance, people who itemize their deductions for items like a home office or business meals face a higher chance of an audit. Indeed, some deductions may even automatically trigger an audit.
Likewise, one thing that tends to grab the attention of the IRS is supposedly excessive charitable donations. If the donations exceed 50 percent of income, then the IRS may want more information. That is why it is important to get dated receipts for any charitable donation, no matter how small. In fact, dated receipts are required for cash contributions of more than $250, along with receipts for items such as clothing or furniture.
But perhaps one very common mistake that leads to a lot of audits is simply bad math. It is an old saying to not forget to carry the one, and that is certainly true for tax returns. Indeed, besides double-checking the math, it is also worthwhile to double check the tax return. It may take more time, but doing so can help California taxpayers avoid the pains of an audit.
Source: ABC 7 Los Angeles, “IRS audit: Tax tips to avoid receiving that letter,” Ric Romero, March 14, 2012