CHICAGO (CBS) — Well, it’s tax time — the time of year many are hoping for a refund instead of an audit.
Thankfully, you can reduce your chances of getting audited by avoiding some common mistakes. CBS 2’s Audrina Bigos lays out some of the top red flags that trigger the IRS:
- Missing income;
- High home office claims;
- Unusually high charitable contributions;
- Early payouts from retirement funds;
- Making more than $200,000 a year;
- And questionable deductions.
All of that, and poor math.
“Math errors kick out returns and cause a computer to look further, which could trigger an audit,” said Alan Segal, a Chicago tax attorney. Furthermore, Segal says, rounded numbers also indicate the return wasn’t carefully prepared.
“You didn’t pay $2,000 even. You paid $1,910. Numbers don’t usually come out in even fashion.”
Blurring the lines of business expenses will also flag the IRS.
“There’s a difference, according to the IRS, about what’s a ‘hobby’ and what’s a ‘business’,” said Paul Croft, a Croft Enterprises tax consultant. “IRS rules state you have to make a profit about the fifth year.”
Croft recommends keeping receipts for up to seven years.
“Don’t breathe easy too soon, because it may take them a year or two years to catch up with them. The IRS has three years from which you file to audit you,” Segal said.
Experts say the IRS uses codes to measure typical amounts of travel expenses by profession. A tax return showing 20 percent or more above the norm might warrant a second look.