5 Tax Preparation Mistakes That Could Trigger An IRS Audit For South Carolina Residents

Taxes are notoriously complicated to file, but even just one of these many mistakes can trigger an audit and an avalanche of problems and expenses. This article will help you avoid these five mistakes, including:

• Why excessive deductions could land you in hot water with the IRS.
• How to properly handle rental property income or self-employed income in South Carolina.
• One sure technique for reducing the chance of an error or an IRS audit.

Mistake #1: Claiming Excessive Deductions

Few taxpayers realize that the IRS uses sophisticated computer systems to analyze tax returns against historical data and national averages. A significant spike in deductions—especially when compared to your prior returns or average claims in similar categories—can raise a red flag. If the system detects discrepancies, it will often trigger an audit to verify the legitimacy of the deductions.

Mistake #2: IRS Red Flags Related To Business Expense Deductions

Several common deduction mistakes can invite scrutiny from the IRS. Here are a few examples that frequently lead to audits:

1. Home Office Deductions
   Home office expenses are a common source of confusion. Many taxpayers either misunderstand the requirements or attempt to claim more than allowed. The IRS is particularly vigilant about ensuring home office deductions are valid and fully supported by documentation.
2. Mileage Deductions
   Claiming mileage deductions without proper documentation is a common pitfall. The IRS requires detailed records, including dates, destinations, and purposes of travel. If you are going to claim mileage deductions, you must keep a log showing every trip and the other information already mentioned. Failing to provide this evidence can not only result in losing the deduction but may also lead to further investigation.
3. Unreimbursed Business Expenses
   Unreimbursed business expenses are another area of concern. To qualify, you must provide substantial documentation proving the expenses were work-related and not reimbursed by your employer. Without adequate proof, these deductions may be disallowed, raising the risk of an audit.

Mistake #3: Underreporting Rental Property Income

The IRS computers are constantly comparing your rental property income from previous years to the current year. If they notice that the income you’re reporting suddenly drops or changes significantly, they might want to know why. Also, if the 1099 form the IRS receives doesn’t match what you report as rental income, that’s a surefire way to trigger an audit.

Mistake #4: Errors In Self-Employed Income Reporting

The IRS checks the 1099 forms filed by your clients and compares them to your reported income as a self-employed individual. If the numbers don’t match, it’s one of the quickest ways to end up being audited.

Mistake #5: Failing To Hire A Tax Preparer

Simple math errors, like calculation mistakes, aren’t likely to result in a formal audit. The IRS usually catches these errors, corrects them, and sends you a notice explaining the changes. However, things can get more complicated if your tax return involves anything beyond basic calculations.

If your tax situation has any complexity, hiring a reputable tax preparer is a smart move. They’ll stay up to date on the tax laws for that year, know which deductions are valid, and avoid those that aren’t allowed.

By working with a professional, you reduce your chances of making mistakes that could trigger an audit and missing out on valuable deductions or savings. Without guidance, there’s a greater risk of errors that could bring unwanted attention from the IRS.

Have Questions About Your Tax Filing? Want To Avoid An IRS Audit?

For more information on Tax Preparation Mistakes That Could Trigger An IRS Audit In South Carolina, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (864) 271-7940 today.