Tax deadlines are approaching fast, and many are ready to either file an extension or rush through their preparations. With April 15 right around the corner, many are faced with the decision to make “guesstimates” on their returns. While lying on tax returns is never recommended, there are still many individuals who are going to do it regardless of the risks. The real truth is that only about 1 percent of Americans were audited by the IRS in 2013, and that is mainly due to common red flags that are actually easily avoided. Those who plan on cheating on their taxes this year will want to pay close attention.
In 2013, the IRS audited the lowest amount of people since 2008 due to budget cuts. This year, the budget has been cut further; also, based on reports from the IRS comparing statistics from this time last year, they are behind by nearly two million in processing returns. With the current trends from the past few years, that will mean fewer inspections should be being conducted this year. The chances of an audit increases with the amount of income a person earns, with nearly 25 percent of all reviews occurring with an income of over $10 million.
There are many different red flags that the IRS uses to determine who will and will not be reviewed, the biggest one of which is by simply not filing one’s taxes. If the individual is required to file a tax return and they fail to do so, the IRS will hunt them down.
One of the most seen mistakes by the IRS is claiming someone else’s child. If two people claim the same child, that will raise a red flag. So if one’s grandmother is taking care of the child and the mother claims the child as a dependent, most likely both will be audited. “This can happen year after year, even after proving to the IRS you are the one who is correct in deducting the child,” said Al Giovett, a member of the National Society of Accountants. The real truth is that once someone has been audited, the chances they will be reviewed again by the IRS rise dramatically.
A common mistake people make is claiming strange deductions. Medical bills are great deductions, but claiming a pet’s medical bills is stretching it a little too far. If the deduction would make the average person shake their head, then chances are it should be avoided.
Another red flag that commonly triggers an audit is claiming too much in charitable deductions without submitting the proper documentation to back it up. Simply put, if anyone gives away an item worth of value, then they need to get it appraised and get a receipt.
The real truth is that no one should lie to the IRS, in order for them to not raise any red flags and therefore diminish the chance of being audited. If someone is planning on cheating the tax man, then they should know that they are risking the government finding out and hitting them with penalties.
By Kaylynn Charbonneau
Photo by 401kcalculator.org – Flickr License