Want to avoid a tax audit? Read these tipsWith only about two weeks remaining until the April 18 tax filing deadline, the race is on to complete state and federal individual income tax forms. Hastily prepared tax forms can result in errors and might even trigger an audit, reports the Minnesota Society of Certified Public Accountants.
By: Staff Report , Alexandria Echo Press
With only about two weeks remaining until the April 18 tax filing deadline, the race is on to complete state and federal individual income tax forms. Hastily prepared tax forms can result in errors and might even trigger an audit, reports the Minnesota Society of Certified Public Accountants.
Among the common mistakes:
--Not signing the tax return.
--Incorrect or missing social security numbers and/or tax identification numbers.
--Double counting of dependents – eg., claiming older children who also claimed themselves.
--Failing to track and/or report income from tips.
Some mistakes and misstatements can even lead to an audit by the Internal Revenue Service or the State Department of Revenue, reports the MNCPA. According to MNCPA members surveyed, red flags include:
--Filing a paper tax return rather than using an electronic form (in 2010, 76 percent of individual income tax filers from Minnesota used electronic forms).
--Claiming excessive home office deductions – especially for items that could be used for personal use.
--Charitable contributions that are high compared to income.
--Entering a lot of numbers that end in zeroes.
--Having a large refund.
--Not reporting correct amount on 1099 forms (forms used for income other than wages, salaries and tips).
According to the IRS, it processed 144 million individual income tax returns during 2010. In the same year, it audited 1.5 million individual returns. In all, slightly more than 1 percent of all personal returns were audited last year.
“While high income earners might feel they are singled out for audits, the reality is that 30 percent of audited returns are from lower income returns that claim the earned income tax credit,” said Todd Koch, MNCPA member and partner with the Minnesota accounting firm of John A. Knutson & Co. “By exercising good caution and double-checking your work, you may minimize your risk and potential headaches later on.”
The Minnesota Society of Certified Public Accountants (MNCPA) serves the public interest by advancing the highest standards of ethics and practice within the CPA profession. MNCPA delivers on that promise by offering extensive continuing professional education and resources; advocating for members and the public with regulatory agencies and boards; and mentoring and encouraging the CPAs and business leaders of tomorrow. Founded in 1904, MNCPA’s 9,200 members work in public accounting, business, industry, government and education. To locate a CPA, visit www.mncpa.org/referral or call 1-800-331-4288.