Tax season is, arguably, one of the most stressful times of year for individuals in the United States. With all the time individuals put into compiling documents and understanding filing options, it is easy to see why tax audits can be a cause for alarm after making it through such a hectic part of the year. Tax audits are extremely inconvenient, as they often will cost you time and the expense of being examined. Often, audits will also lead to a tax dispute. However, the good news is that it is fairly simple to avoid being audited as long as you remain organized and honest when filing your taxes.
One key thing to remember is that, to the IRS, everything is income and should be declared as such. This includes any foreign income or foreign bank accounts that are sometimes forgotten because foreign banks do not send Forms 1099. If you are audited, the IRS can ask for your bank records and determine if you have failed to declare all necessary items. Keeping good records is a great way to prevent this and can help get you of trouble at the beginning of the auditing process. Always check to make sure that the financial documents you are receiving are correct, especially Forms 1099. The IRS focuses on information return matching, so if the received documents about financial records aren’t consist, you may run into a problem.
Another easy way to make sure filing your taxes and the proceedings afterward run smoothly is to pay close attention to timing during tax season. Make sure you have a clear idea of what financial information you have to file for the current year and when you can claim deductions. When it comes to deductions, also make sure that you are not claiming false deductions. Seek advice if you are unsure about what qualifies as a legitimate deduction. However, it is usually easy to tell, if you are being honest with yourself, what financial activities qualify for deduction.
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