In Case You Missed It...
RED FLAGS THAT CAN TRIGGER A TAX AUDIT
While the percentage of taxpayers who are audited by the Internal Revenue Service is almost infinitesimal -- less than 1 percent -- if you're one of them, it's a big, big deal. And it's not just wheelers and dealers who get audited. The average Joe who makes a typo on his tax return or the harried mom who forgets to include the 1099 form from her stock broker are setting themselves up for trouble. Here are five red flags that could lead to an audit:
1. You make too much money.
Ah, such a problem we should all have! But if you do have a higher-than-average income, which is considered $200,000 and up, you have more opportunities and possibly a greater temptation to cheat--and the IRS knows this.
2. Your charitable deductions are too high.
You may be proud of tithing to your church, but if you donate significantly more than other taxpayers at your income level, it could trigger an audit. This fear should not stop you from giving to your favorite charities; instead, be sure to document every dollar you donate.
3. Your mortgage interest deduction is too high.
You purchased a big house in an area known for high real estate prices, but if your mortgage interest deduction is far higher than other taxpayers in your income bracket, beware. The IRS will notice that and could think something is fishy.
4. Oops! You made a typo on your tax return.
Geez, it was a simple arithmetic mistake, but the IRS doesn't see it that way. Simple errors--be they mathematical or a typo in your Social Security number, for example--will draw the scrutiny of the IRS. Your best defense is to carefully check your return before submitting it.
5. You forgot to report some of your income.
All non-wage income, such as capital gains or a dividend payout, will be reported to the IRS on a 1099 form, which you will also receive. Just be sure you include that on your tax return so the amount you claim you earned for the year matches what the IRS thinks you earned.