As the tax season started, you might find it stressful with the complications of filing different taxes and with several changes in taxes made by the IRS. It might be tempting to cut a few corners to finish the process.
However, note that the IRS has a sophisticated system to check tax returns, which involves automated and human examinations. You might get audited once the IRS see inaccuracies in your tax return. The following are common mistakes and lies to avoid when filing this year.
Misreporting Your Income
Most people nowadays have multiple sources of income, which you might have forgotten to include in your tax return. Just because you don’t record that a business paid you doesn’t mean the firm will do the same.
The IRS often caught those taxpayers with mismatched records when comparing them with the business that paid them.
Writing Off Costs as Business Expenses
The IRS usually does not ban an eye when companies do write-offs which is a tax loophole. However, the IRS might hold you accountable if you report business expenses of 20% or more above the average. The IRS will also trigger an audit if they see excessive business meal costs, deducting costs outside of the business, like a hobby, and writing off a vehicle or miles that are not also related to business.
It might be tempting to cut corners during the tax season, but there is a big chance the IRS might flag your return and subject it to a tax audit. (Photo: Shutterstock)
Inaccurate Report of Money in Foreign Accounts
The IRS has changed the rules on foreign accounts. In past years, taxpayers simply checked a box containing a foreign bank account.
It is required to indicate the foreign account, what institution they’re with, and if the amount is more than $50,000. However, the IRS might still audit your foreign account despite accurately reporting all information as it is perceived to be hiding something.
If you choose not to report them, the IRS will order you to pay higher fees and penalties. Hence, it is recommended to report them and go through an audit.
Wrongfully Claiming Dependents
This situation usually applies to couples having a legal battle concerning a child’s custody. It is usually a result of failure to communicate with a partner. For instance, if both couples claim the child as their dependents during the tax filing. The IRS might flag the return as “double claiming” and will be subject to audit.
GoBankingRates said only one parent, the primary custodial parent, should claim as dependent unless an exemption is filed.
Deducting Medical Expenses
Medical expenses can be deducted from your taxes, but only if they fall under the following guidelines: it must be eligible for unreimbursed medical care exceeding 7.5% of your adjusted gross income. Eligible expenses include ambulance services, eyeglasses and contact lenses, long-term care service, medical insurance premiums, nicotine gum and patches, and some operations and surgeries.
