It’s one of the most dreaded moments there is – opening your mailbox to find a letter from the Internal Revenue Service.
“Even when it turns out to be good news or a check, we feel a frisson of fear, that chill going down the spine. Just seeing the envelope is so daunting,’’ says Eva Rosenberg, author of the best-selling book “The Trump Tax Cut: Your Personal Guide to the New Tax Law,’’ published by Humanix.
But fortunately "The Trump Tax Cut" guidebook offers a series of simple steps you can take to minimize your chances of getting hauled in to appear before Uncle Sam’s tax officials.
Here are 10 of them:
- Sweat the details: Slow down and make sure you’ve included all of the correct information on your return. Usually, errors are minor – but they still can tip the scales toward the chance of an audit.
- Explain yourself: It’s important to inform the IRA of how you arrived at your estimations. For instance, when you have to estimate a cost or the basis of an asset or stock you just sold, it’s important to tell the IRS how you arrived at that estimation. Attach any related documents that can make things clear.
- Use Form 8275: This document allows you to disclose items or positions not adequately explained on a tax return to avoid penalties. The IRS audits more than one million Americans each year, and you can avoid becoming one of them. Providing a clear explanation on Form 8275 protects you and forces the IRS to limit any objections to a three-year-audit window.
- Home-office hazard: Be careful about how much you deduct for your home office. And if you have a full time job in addition to operating a side business from your home, the IRS will likely scrutinize your home-office deductions even more rigorously.
- Records of donations: The IRS doesn’t mind you taking legitimate deductions for donations, but you must keep detailed records. A written acknowledgement of any cash donation you make is now required. And if you’re giving away an old car, deduct what it’s worth now, not what it cost brand-new.
- Incorporate if you are self-employed: If you are self-employed and file a Schedule C return, the chances are greater that you’ll be audited. Think about incorporating or creating a limited liability company (LLC). Not only are they less likely to raise red flags, with an LLC you can take more deductions.
- Avoid amending your tax return: When you have to make corrections on your original tax filing, the IRS is going to want to know why and may end up auditing you. So do your best to file everything correctly the first time around.
- Leave nothing blank on your return: If you’re not sure about a line on your form, get help so you can fill it out. The IRS wants to see a complete form without omissions.
- Minimize your year-to-year differences: The IRS compares your return to returns of past years. If there is a large jump, in, say, the deduction for your mortgage interest, it will likely trigger an audit.
- Avoid early retirement withdrawals: Yes, emergencies can warrant withdrawals from personal IRA and 401(k) accounts, but they can also bring scrutiny to your tax returns. That’s because auditors assume those who pull retirement funds make errors on their taxes.
For more details on these tips and additional advice on how to avoid an audit, pick up a copy of “The Trump Tax Cut: Your Personal Guide to the New Tax Law.”
Note: "The Trump Tax Cut" is the #1 Amazon best-selling tax guide revealing hundreds of deductions, loopholes and strategies for the new tax law. Check out the FREE Offer – Go Here Now
© 2023 Newsmax Finance. All rights reserved.