Tags: tax | audit | Grant | IRS

To Avoid a Tax Audit, Avoid Red Flags on Your Return

By    |   Friday, 06 March 2015 08:00 AM

The April 15 tax deadline is fast approaching, and it goes without saying that you want to avoid an Internal Revenue Service (IRS) audit of your return.

How do you do this? CNBC personal finance reporter Kelli Grant offers several tips.

"The best way to limit your chances of being [audited] is to avoid common mistakes on your return that raise red flags," writes Grant. That could mean mistakenly reporting a figure that is too low for your income.

"What people should be focused on is just filing a complete and accurate return," Terry Durkin, president-elect of the National Association of Enrolled Agents, an industry group for tax practitioners, told Grant. "By doing that, there's no need to worry."

Keep good records, especially if you have a home business or are claiming a credit, Grant suggested.

To be sure, if you do make mistakes, the IRS' budget cuts might bail you out. That's because those cuts are forcing the agency to pull back on tax audits.

So, "if you don't already cheat on your taxes, it's an opportune time to start," said Yahoo Finance columnist Rick Newman.

The probability of getting audited this year has dropped to an 11-year low, with just 0.86 percent of individual taxpayers likely suffer that fate this year, he reports. That's down from 1.11 percent in 2010. For those earning more than $1 million, the slide will likely be to 7.5 percent from 8.4 percent.

That's "a deeply disturbing drop in our individual audit rates," IRS Commissioner John Koskinen said in a speech last month.

To be sure, the IRS' budget cuts are a double-edged sword for taxpayers. Anyone seeking tax assistance from the IRS or awaiting a refund from the agency can expect delays.

Meanwhile, though many people believe that the wealthy pay little if any taxes, nothing could be further from the truth, says Stephen Moore, chief economist at The Heritage Foundation.

"The idea that the rich aren't paying any taxes is based on misinformation fed to voters," he wrote in The Washington Times.

The latest IRS statistics show that the top 1 percent of Americans by income earned 19 percent of total income and paid 35 percent of federal income taxes in 2011, Moore explains.

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The April 15 tax deadline is fast approaching, and it goes without saying that you want to avoid an Internal Revenue Service (IRS) audit of your return.
tax, audit, Grant, IRS
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2015-00-06
Friday, 06 March 2015 08:00 AM
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