Getting your tax return audited by the IRS is unlikely to happen, but there are still several things that could trigger the system.
We already know that this tax season will be slow going. There’s already a huge backlog of returns from last year. On top of that, the IRS has said that delays are likely to occur, due to staffing issues and errors. In addition to delaying your refund, some errors could get you audited.
One of the easiest ways to get your return flagged is by claiming too many credits or deductions. Of course, the acceptable amount will vary based on your income. Another way that your tax return might get flagged is if your reported income doesn’t match what shows up on your tax forms. If your income doesn’t match, an automatic notice will be sent.
The IRS uses a special software system that gives each return a numeric score. The system estimates how many write-offs you should have based on your income. If the number of credits or deductions is outside of that estimate, it will make your score higher. For example, if you make $90,000 a year and have $60,000 worth of charitable donations, the system will flag your return and your score will go up. Higher scores are more likely to get audited.
Federal Relief Tax Return Errors Will Get Flagged
According to CNBC, we can assume that a lot of federal aid mistakes will get flagged this year. This includes any stimulus payments and the advance child tax credit. To make sure these numbers are correct on your tax return, the IRS has sent out letters with all of the information you need. These numbers are easy to make mistakes with, so it’s important to wait to file until you have all of the needed information.
Audits Are Rare, But You Should Be Prepared For One Anyway
During the 2020 fiscal year, the IRS completed 452,515 tax return audits. That’s 0.29% of all of the returns filed that year. Since the number of audits completed is so low, some people just throw all caution to the wind and file what they want. It’s important to keep the software system in mind, though.
“Some people play the audit lottery, meaning they’ll do whatever they want, and know that the chances of getting caught are slim,” said John Apisa. He’s a CPA and partner at PKF O’Connor Davies LLP. “That’s not a good philosophy to have, though.”
The best way to combat getting audited by the IRS is making sure that everything you submit to the agency is correct. In addition to that, make sure you have proof. Keep receipts for income and deductions. In fact, keeping records for seven years could save you in the long run. If you have proof, it will be easier to work with the IRS.