12 Ways to Dodge a Tax Audit This Year (#5 Is So Simple)

Preparing your taxes for filing each year is stressful enough. Worrying about whether your return may be audited can create a whole other level of stress.

Most tax returns are fairly straightforward, but if you’ve made extra money through a side hustle or had a change in your life circumstances, there may be new forms to file.

Here are a few things you can do now to minimize the risk of an audit in the future.

Getting tripped up by math on a tax return is one of the most common errors, according to the IRS. It can be easy to miss some basic math with all the calculations you might have to make.

Be sure to double-check your math before submitting your return. This kind of mistake may slow down your refund and trigger your return for a possible audit.

Deductions can be helpful if you’re taking them for legitimate reasons such as charitable donations, student loan interest, or retirement contributions.

But too many deductions could be a sign that you’re trying to save too much money by taking deductions you don’t qualify for.

Instead, limit your deductions or don’t include those that may be borderline. It’s also important to ensure you have documentation to cover all of your deductions in case you get audited.

Making charitable contributions may be a way for you to help others or support a cause you believe in. You can also take a dedication for them on your tax return.

But you must be honest about how much you’ve given in charitable contributions and don’t inflate your contributions. You should also make sure you have receipts for your contributions to use in a potential audit.

There are times when life gets in the way, or you’re having trouble pulling together the paperwork needed for your return. You may even decide to file for an extension.

But filing on time each year (by April 15, 2024) shows you’re in compliance with IRS rules and won’t throw up red flags with the IRS later on.

You’ve spent all this time preparing a return and checking your math over and over again. But that could make you forget something as simple as signing the return before you file it. 

You could get penalized for an unsigned return, which could bring unnecessary attention to you.

Side hustles can be a great way to make some extra cash or turn a craft or hobby into cash. But just because it’s a side hustle and not a full-time job doesn’t mean you can ignore that income on your tax return.

You should receive 1099 forms from employers you have freelanced for; they file those with the IRS, too. If you make money from a side hustle, be sure to account for all of that income, especially if you’re taking self-employment deductions.

If you're one of the millions of people working from home either full- or part-time, you probably want to take the home-office deduction.

But it's important to take a critical look at the office space in your home and determine exactly how much you can deduct as office expenses. Inflating your office costs could be a red flag for the IRS. 

And remember that if you're a W-2 worker — your employer withholds taxes on your salary — you're not entitled to take the home-office deduction.

You may be tempted to make it easier for yourself by rounding numbers when it comes to income, deductions, or other income and expenses.

But the IRS wants you to be precise so they know exactly how much you owe. Rounding numbers will look suspicious, especially if the rounded numbers you use don’t match the exact numbers on the documentation you send in.

The IRS will check everything on your return to ensure its accuracy, and incorrect information can cause issues with your return being filed properly.

Numbers are important, but so is basic information like your name and address. Your Social Security number is a very important identification number, so you’ll also want to ensure it’s correct before you file your return.

While your family pet can't be claimed as a dependent, trying to do so will raise a red flag for the IRS. But if you have human dependents, there may be subtle issues to consider.

If you're divorced, you'll have to consider which parent will claim the children as dependents. You'll also have to decide who qualifies as a dependent as children get older. 

If you have an aging parent living with you, claiming them depends on their annual income as well as how much you spend to care for them.

You may have saved money in a retirement fund, but accessing that cash now will have tax consequences.

You must account for any withdrawals from your 401(k), IRA, or other retirement accounts and pay taxes on that money if you took a tax deduction when you contributed. 

If you have a Roth IRA or Roth 401(k), you've already paid the tax on those contributions, so those distributions are tax-free now.

You may decide you want to contribute to a particular candidate or election cause that is important to you, especially as the 2024 election cycle begins to gain more attention.

However, unlike charitable contributions, political and election contributions can’t be deducted from taxes. Therefore, remember to keep them off your tax return.

Preparing a tax return can be stressful, but taking a little extra time to review it before you file it can save you money and hassle later on.

The sooner you file your return, the sooner you’ll get your tax refund if you’re entitled to one. Consider how you plan to spend or invest any refund. 

You may want to start investing or open a high-yield savings account to earn interest on your refund.