It’s everyone’s favorite time of year: tax season. The birds are chirping. The bees are singing. The taxpayers are anxiously cramming into an accountant’s office to formally declare income, deductions and exemptions from the previous year.
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And they’re hoping they documented it all accurately so they can go on their merry way. After all, no one wants an audit. However, there are a few tax moves that can definitely place you among the unlucky few. Gene Bott, CPA, founder at Tax Hive, broke down the three most common moves sure to trigger extra scrutiny — and offered tips to avoid them.
Income Mismatches
The IRS has its own matching system that compares information you report on your tax return against payer-issued W-2s, 1099s and brokerage statements. As Bott explained, every dollar you earn is already reported to the IRS in some way. So the IRS can very easily catch if the income you report and the income the payer reports do not match.
To avoid an audit, Bott advised building an income checklist prior to filing your taxes so that every W-2, 1099, 1098, etc., is declared and accounted for.
A word of caution: Not receiving forms from a payer does not mean your earnings weren’t sent to the IRS.
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Disproportionate Deductions
Another move sure to send up red flags is claiming deductions that are higher than expected in your designated field. For instance, if you own a remote IT business but claim thousands of dollars in hotels and airfare, the IRS may want proof that these were business expenses.
Bott encouraged individuals to claim all deductions to which they are legitimately entitled (maybe you are actually traveling to meet clients), but to keep solid receipts in case further scrutiny is prompted. This becomes even more important if your business has had year-over-year losses.
Rounding Too Many Figures
“The IRS knows you aren’t likely to have [exactly] 1,000 business miles or several expense categories that end in $100,” Bott said. Too many rounded numbers could trigger an audit.
To avoid this fate, include exact amounts down to the penny. Numbers should look documented, not estimated.
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This article originally appeared on GOBankingRates.com: I’m an Accountant: The Most Common Tax Moves That Trigger Extra Scrutiny
