Tax season tips: How to avoid an audit
While the odds of being audited have declined throughout recent years, some unlucky taxpayers nevertheless find themselves under the Internal Revenue Service’s microscope each year.
While those with incomes in excess of $1 million are more likely to be audited, there are a number of ways taxpayers of all income levels can decrease their chances of being screened.
The best way to lower your probability? Blend in.
“The IRS uses … a computer program that compares your deductions with those of others in your income bracket,” Kristian Finfrock, financial advisor and founder of Retirement Income Strategies, told FOX Business. “While this should not scare you away from taking proper deductions it should be noted.”
You can remain under the radar by making sure your facts are accurate – that means double-checking your math, making sure your forms match your returns and making sure you entered the correct information for things like Social Security numbers. It also means filing on time. Finfrock noted it can be useful to work with an expert.
If you realize you made a mistake, you can always file an amended return. That’s something that can be useful for people who may not have received their W-2 forms on time.
And for those in the upper income brackets, it’s particularly important to make sure you are following the rules.
“The higher up you are on the income ladder and the more complicated your return, the more likely you are to be audited,” Finfrock said. “So do everything legally, ethically, and morally to reduce and eliminate taxes but never do anything illegal!”
As previously reported by FOX Business, the number of audits have been on the decline throughout recent years as the number of auditors has dropped about 30 percent since 2010 –falling under 10,000 for the first time since 1953 in 2017 – to 9,510.
In 2017, the IRS screened just 0.62 percent of individual returns. It was the sixth consecutive year of declines. Of high-income households, which are expected to be audited at a higher rate, just 4.37 percent of returns were reviewed, while the rate for taxpayers with incomes below $200,000 was 0.59 percent. Business audits also dropped.
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The agency also has fewer resources to go after negligent taxpayers.
The number of nonfilers pursued dropped to 362,000 last year, from 2.4 million in 2011, ProPublica reported.