If you or your spouse are employed, you've likely started to receive W-2's - it's the beginning of tax season. Many people try to save money by preparing taxes on their own (I know we do), either online or using some sort of income tax software for preparers.
Whether or not you do your taxes on your own, it's helpful to know red flags that may give you a higher likelihood of being audited by the IRS.
One of the biggest things that can lead to an audit is failing to report all of your income. This may seem like a no-brainer, but it can actually be easy to overlook income from side jobs. Any source that sends you a W-2 or 1099 needs to be reported. Additionally, freelance cash work should be reported as well. If you tutor, for example, and your students report you as a tutor to earn an educational credit or deduction, then the IRS can audit you for failing to report all of the earnings you make as a tutor. It's not a good idea to play that game - report all your income, and you run a smaller risk of an audit.
If you have business expenses, another thing that can lead to an audit is claiming 100% business use of a car or a home office, or claiming entertainment-type expenses (such as meals out) as business expenses. It's easy to make a mistake on estimating the share of expenses a home office has, and it's also unlikely that a car is truly 100% business use, so if you are going to claim either, keep very detailed records so you can back up your claims in the event of an audit. To help keep your audit risk low, underestimate your business use of personal property.
Finally, beware of large amounts of itemized deductions. The IRS knows the average deduction levels for various levels of income. Amounts that are significantly above that may raise eyebrows. Again, you can protect yourself by keeping very detailed, accurate records.
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