Few of us want to think about taxes around the holidays, but the year is almost over. Therefore, taxes should at least be on the “back burner” in your mind. You may want to start gathering important documents that you’ll need in 2015 in order to file your tax return for this year.
Because income tax return season is just around the corner, today’s post will be focused on things you can do to reduce your chances of an audit.
Many Americans file their taxes using preparation software like TurboTax and TaxCut. Although they often charge a nominal fee, these programs offer many advantages over the pen-and-paper return. Your return will likely be a lot neater and easier to read and less likely to contain calculation errors. And you may discover ways to get money back that you otherwise would have missed. Using these programs to e-file your taxes usually leads to faster processing, which is a plus if you are expecting some money back from the IRS.
No matter what filing method you choose, you should avoid some filing behaviors that could raise red flags and result in an audit. If you have extra income from a small side job, for instance, it is often better to report is as “other income” rather than filing with Schedule C, “Profit or Loss From Business.” The latter is more likely to catch the attention of auditors.
Additionally, if you are taking large deductions, be prepared to report precise numbers and to attach documentation to prove that your deductions are legitimate. Rounding numbers can make it look like you are estimating rather than calculating. And a large deduction will look less suspicious if you include documentation like receipts, insurance reports and photos.
For the next couple weeks, you may not need to worry too much about taxes. But come January, make sure to check back here to review these tips as you get ready to file your return.