REDUCE YOUR AUDIT RISK

Tax season is in full throttle and many of you may be in the process of compiling the information needed to file your return. As much as you may want to speed through this process, it’s important to slow down and make sure you’re not raising any red flags with the IRS. Here are some tips to get you through tax season and reduce your chance of being audited.

-Don’t use round numbers for deductions. This indicates that you are estimating rather than keeping accurate records.

-Record your income accurately. If you are paid $2,150 from a client and you round that down to $2,000 while the client reports the correct amount, you will likely catch the attention of the IRS.

-Pay estimated taxes on time and keep them current.

-Pay attention to notices from the IRS. If you wait a while to respond, the IRS may already be knocking on your door.

-Do not borrow from the taxes your employees have been paying. This money is withheld for a reason. Send the payroll taxes in a timely manner.

-Be wary of classifying expenses as “miscellaneous”. If you do use this category, make sure you have good documentation.

-Avoid the twelve notorious tax scams, otherwise known as the “Dirty Dozen”. These include:

Phishing
Hiding income offshore
Filing false or misleading forms
Abuse of charitable organizations and deductions
Return preparer fraud
Frivolous arguments
False claims for refund and requests for abatement
Abusive retirement plans
Disguised corporate ownership
Zero wages
Misuse of trusts
Fuel tax credit scams

--LeAnn Carlson is the Audit Manager for Cook & Associates, a full service public accounting firm operating from offices in San Marcos and San Antonio, TX.

TAX PREPARATION CHECKLIST FOR INDIVIDUALS

It's coming up! The extension deadline for 1040s is right around the corner (October 15th) and you may be scrambling to compile all your necessary documents. To assist you in your preparation, here's a short checklist of items you or your tax preparer may need.

GENERAL INFORMATION
 Names, SSNs, and Birthdates for you, your spouse, and your dependents
 Tax return from prior year
 Voided check for electronic filing
 Payments of estimated federal, state, or local taxes

INCOME INFORMATION
 W-2s
 Social Security received
 1099s – Interest and dividend income, retirement, annuities, unemployment
 Alimony received
 Gambling income and losses
 Securities (date of purchase, cost basis, date of sale, and sales price)
 Rental property income (and expense)

SELF-EMPLOYED INFORMATION
 Income (1099s, bank deposits, interest income)
 Cost of goods sold
 Auto expenses (mileage, insurance, interest, repairs/maintenance)
 Wages paid
 Business expenses
 Home office expenses

ITEMIZED DEDUCTIONS
 Real estate taxes
 Mortgage interest – 1098
 Medical expenses (prescriptions, insurance, doctors, dentists)
 Charitable contributions
 Unreimbursed business expenses
 Union/Professional dues, hobby expenses, safe deposit box, tax prep fees

TAX CREDITS AND DEDUCTIONS
 Child and dependent care expenses
 Education expenses (1098-T or interest on student loans)
 IRA contributions
 Alimony paid

--LeAnn Carlson is the Audit Manager for Cook & Associates, a full-service public accounting firm offering audit, tax, bookkeeping, and consulting services. The Firm has offices in San Marcos and San Antonio, TX.