Procrastinator's Guide to Tax Deadlines & Avoiding Audits
Tax Day 2024 is right around the corner on April 15, 2024, so if you’ve been procrastinating on the process of prepping your income tax returns for yourself or your business, we’ve gathered helpful tips on tax deadlines and avoiding audits.
Because here at Money Mastery, we know that when taxpayers are down to the wire, they tend to make mistakes. And that’s not something you want the Internal Revenue Service (IRS) to pick up on. Audits are rare, but have been steadily increasing since 2008. Plus, these days, new IRS funding and use of AI increase your audit risk even more. Here are the red flags that could get you singled out.
Report all income and double-check your numbers
The easiest red flag to avoid is unreported income, but it’s also the easiest to overlook. This is especially true for those who have several income sources to report. Which is why it’s a good idea to wait for all of your income reports, college tuition reports, bank and investment statements, and financial paperwork before you start your tax return. The IRS will match all of your reported financials to your return, and if they see something missing or a discrepancy they will make changes to the calculations on the return, or send a letter audit – even if it was by accident on your end. Double-check that numbers match, as well as your reported dependents and exemptions.
Be honest about your business expenses and deductions
Another red flag for the IRS, of course, is excessive personal or business tax deductions. It’s common sense, but, overall, honesty truly is the best policy on your tax return. For example, according to their occupational codes, to measure travel by profession, a tax return that is 20 percent or more above the norm may be further investigated, or a charitable deduction that is 40 percent of your total income would definitely be a red flag for the IRS. Also be mindful of legitimate deductions, like vehicle-related or mixing business and personal expenses, such as dinners out. You must have receipts or invoices for each of your deductions to support the numbers you’ve claimed on your return. Note: bank and credit card statements alone aren’t enough. No documentation = no deduction.
File your tax return on time
Above all, file your tax return on time to avoid any repercussions from the IRS. Individual income tax returns are due in the United States on Tax Day, April 15, 2024. This is also the same deadline for sole proprietorship (and some LLCs) tax returns, plus Q1 2024 estimated tax payments. The tax deadline for S corps, partnerships, and LLCs that are taxed as a partnership is March 15, 2024.
According to the IRS, electronically filing your tax returns can prevent mistakes and lower the odds of an audit, with the error rate for e-filing at 0.5 percent. The error rate for a paper returns is 21 percent.
Of course, if you’d rather not spend time trying to hunt down these red flags yourself, give your trusty tax experts at Money Mastery a call.