The holidays are over and now it’s time to focus on the new year.
First things first, taxes. The IRS will begin accepting returns on Jan. 29. And even though tax changes could be coming as President-elect Donald Trump assumes office, there are several things you should know before you file.
First thing: due to inflation, income tax brackets have shifted a bit. Be sure to find out where you land before filing.
Also, there are several things you should know to avoid the dreaded tax audit.
The IRS audits some returns to get a closer look. If you get the request, CPAs suggest calling your assigned auditor immediately.
“That person would explain more specifically about what they really want to see because the letters that come out are usually kind of scary,” said Larry J. Herring, CPA.
So, what can trigger an audit? You could be randomly selected by the IRS or …
“Taking an extraordinary amount of charitable contributions, deductions and the IRS would want to know, do you have receipts for those things?” explained Herring.
Excessive tax deductions are red flags for the IRS. So is not reporting all your income and mixing business and personal expenses.
Pay close attention to how you deduct medical expenses and the earned income tax credit.
Final advice?
Double-check your number, especially if you file on paper or use tax software. And when in doubt, get help from a tax professional.
“Keep good records,” said Herring.
And keep them for at least three years, just in case the IRS comes knocking.
One out of every 500 tax returns were audited in 2023. Taxes are due April 15 this year.