It happens to all of us, even me, as earlier this week, I got click baited. No one wants to face a tax audit, right? So why wouldn’t you click on an ad that says it will lead you to a list of red flags that could cause the IRS to give your tax return an extra look and potentially trigger an audit.
And I’ll even allow you the chance to give into this impulse by providing you a link to the article here.
This article is from Kiplinger, and although its eye-catching title and slideshow presentation are very clickbait-y, it is not as if the article is full of bad information. Some of it is even very good, as people should know that the IRS receives copies of your W2s and 1099s, so if you try to not report all of your income, the agency can figure that out without much work.
At the same time, though, I find the idea of red flags that can to an audit kind of misleading.
For instance, another entry on the list is owning your own business, because of how it can open up a sea of potential deductions of which the IRS may want proof. And sure, your business transactions could potentially lead the agency to want to look deeper into your return, but does that mean you should not take deductions to which you’re entitled in the hopes of avoiding an audit?
Of course not. Instead, I think that the proper mindset to take when doing a tax return is to make sure you are submitting a legitimate one. As long as you do that, you can have as many red flags on it as you want. That will just mean that you are using the system to your best advantage and getting a better return.
This type of mindset may be even more crucial as we head into the first tax return season following the passage of the Tax Cuts and Jobs Act. Are you just assuming that you will now fit into the larger standard deduction and that will essentially sum up your return? Well, that is certainly going to be the case for a number of people, but it’s an assumption that could also lead you to not looking into everything for which you could still qualify and benefit from. And if there are legitimate credits or deductions, don’t you want to use them?
Sure, the more that you do take advantage of those things, the more chances there are that your tax return will look different enough from the norm that the IRS may question it. But why should this be a worry if everything you are doing is legitimate and legal?
As always, we are happy to help you find the best answers for your individual situation. If you want some of those answers before the end of the year, time is starting to run short, but we can still offer appointments before year end. Even if you don’t look deep into the situation by then, though, we will still be here once we get into 2019 and are again ready to help you with another tax return.
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To ensure we don't make the folks at the IRS ornery, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.