Seen At 11: Tips On How To Avoid Auditing By The IRS
NEW YORK (CBSNewYork) – There are few things more stressful than filing your taxes, but there are five red flags the Internal Revenue Service looks for before they come knocking on your door, so you can hopefully avoid an audit.
As CBS2's Kristine Johnson reported, anyone who has ever sat across the table from an IRS agent, accounting for every penny on a tax return, knows how scary it can be.
There are a number of red flags the IRS looks for on your return that can increase your chances. Some of them you have control over, said Joy Taylor, a tax expert with Kiplinger. Others, like your income level, you don't have control over.
"The percentage rate for the audit is higher for people who have higher incomes," Taylor said.
If you make $200,000 a year, there's a one in 37 chance you'll be audited, Taylor said. If you're a millionaire, the odds jump to 1 in 13.
"It's mainly because people with higher incomes also take more deductions, and IRS is a lot of times focused on the deductions that people take," Taylor said.
Such is especially true with charitable deductions.
"If you're in an income level, and your charitable deductions are disproportionately high compared to others in that income level, your return is more likely to be flagged," Taylor said.
"Sometimes people will apply for benefits or credits that they're not necessarily entitled to," IRS spokeswoman Patricia Svarnas said.
Applying for tax credits on things like continuing education, retirement contributions or energy efficient home improvements may also draw the attention of auditors, Svarnas said.
"You also want to be careful of your allowable deductions, make sure you don't include all kinds of deductions that don't make sense for your profession," Svarnas said.
For example, don't deduct expensive outerwear when you have a desk job or write off a cell phone your employer is paying for.
Another red flag is writing off losses from work, Taylor said, that's more of a hobby than a side job, like selling your stuff on Ebay or breeding dogs.
"Especially if these filers have a lot of other income from other sources," Taylor said.
Self-employment and working in cash-based industries may also draw more scrutiny. But experts say in the end, less than 1 percent of the population can expect to be audited this year.
