How (Not) To Get Audited
(CBSMoneyWatch) It’s time to talk taxes: 1099 forms have gone out and you should be organizing your paperwork and getting ready to pay the taxman. CBS News contributor and analyst Mellody Hobson has some tips on how to get audited.
That might sound funny, because no one wants to get audited, so you should do the exact opposite of what Hobson is about to recommend. The risk of getting audited is fairly low, but it is an enormous hassle, and it can happen to the best of us.
The most common and entirely preventable reason for an audit is mistakes on your tax form. To avoid that, read or watch Hobson’s segment on the most common tax mistakes. It’s best to file electronically because tax software can catch a lot of mistakes. An error-free return means faster processing by the IRS and a faster refund check for you.
Want to know a great way to get audited? Don’t file your taxes. The IRS will surely come knocking. Even if you don’t owe the government money, you frequently still need to file a return. Another red flag for the IRS — aside from not filing at all — is not reporting all of your income. This includes alimony income, rental income and self-employment income. If you got a check, you need to report it, and if you don’t, you could pay a lot more with interest and penalty charges.
April 15 sneaks up on a lot of people and Hobson is frequently asked if it’s bad to file late. It doesn’t hurt you to file for a six-month extension, but the extension is to file — not to pay. What really hurts you is burying your head in the sand and not filing for the extension. The IRS will hit you with a late-filing penalty equal to 5 percent of the taxes you owe for each month or part of a month for up to five months. Don’t be late without filing for that extension. Unless, of course, you’d like to get audited. Being late is a great way to pursue that.