MoneyWise Live | April 15, 2019

Avoid an IRS Audit

Show Notes

It’s the last day to file your income taxes … unless you get an extension. And if you waited this long to file— you probably aren’t getting a refund. In fact, he last thing you want in the weeks ahead is to hear from the IRS.  Because we all know that a letter from the IRS after April 15th could mean you’re being audited. Rob West has ways to prepare for an audit and how to avoid one next year. 

Disclaimer - Rob not a CPA or a tax attorney. What we’re going to talk about today is just what I’ve discovered doing my own research. If you know you’re being audited by the IRS, we would urge you to get professional help and you can do that at MoneyWiseLive.org.

What are some general things that we need to know if we get that dreaded letter in the mail?  And if you do, don’t panic— the IRS doesn’t want to throw you in jail. They just have questions about something that may or may not result in you owing more tax than indicated on your form.

  • One of the things most likely to trigger an audit is unreported income.
  • The next big problem area is claiming too many charitable donations. 
  • If you’re self-employed, it’s tempting to report too many business losses on a Schedule C.
  • It’s not guaranteed to get you audited— but the IRS will certainly take a good long look at claiming a home office deduction.
  • Math errors can trigger an audit. So be sure to check and recheck your math to avoid mistakes. 
  • It’s okay to round off to the nearest dollar— but lots of big, round numbers can trigger an audit too.

Next, Rob and Steve answer these questions at 800-525-7000 or via email at Questions@MoneyWiseLive.org:

  • Since your mortgage rate are based on your score, should you get 5 quotes from credit institutions for a mortgage or will that damage your credit rating?
  • If you're 77 and have a term life policy for $50,000 which will terminate soon and continuing it will cost about $10,000 annually, what options are there if you want to leave something for your grandchildren?
  • If you have a "regular job", regular hours and regular pay, is there a certain percentage you should expect to get back on your taxes?
  • If you have a whole life insurance policy for $25,000 you wish to give to your son, should you cash the policy out and invest it into a Roth IRA?
  • If you got a new Best Buy credit in the mail that you didn't request, will canceling the account cause a drop in your credit rating?
  • If you're single, have annual income of $34,000 and like to support your local Christian schools, what is the maximum amount of money you should donate to them without getting audited?
  • What should the "25% of net pay" for a home include?
  • If your daughter isn't running a business but is just working for someone who gave her a 1099-MISC, can she take advantage of expenses she incurs?
  • What is the best savings avenue for a new born?  

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