For as long as the tax system has been implemented, there have been individuals out to avoid paying into it. While there are legitimate ways to do so, there are also a lot of scams out there to illegally evade paying taxes. As time goes on, the IRS becomes aware of these scams and implements a check system to catch them. “Red flags” go off when something suspicious is noticed on a tax return. This triggers more scrutiny of the return and possibly an audit or disallowance of a particular practice.
Some time ago, the home office business deduction was said to be one of these red flags. The reason for this was that so many people were illegally claiming the deduction, as well as other exorbitant business expenses. Many of these people may not have realized they were filing inaccurately because they were being “educated” on the tax system by people that were less than scrupulous. As more people became aware of the proper way to claim these deductions, they became less of a red flag.
Therefore, education is one of the best ways you can guard against drawing unnecessary attention from the IRS. If you are aware of what the tax laws are, it is easy to abide by them. If taxes are just too complicated or boring for you to read up on, the next best thing is to utilize a reputable tax service, such as TaxBrain.com. A service with software like this takes the guesswork out of filing your taxes. Therefore, education may not be quite as necessary, although basic knowledge is always helpful.
Another very useful way to avoid IRS red flags is by making sure your information is accurate. Knowing how particular tax issues work is helpful, but this does little good if you input the wrong social security number on your tax return. An inaccurate social security number for you or your spouse will stop a tax return dead in its tracks. However, the same thing for one of your dependents may cause the IRS to think you are trying to incorrectly claim a dependent. While this will not cause them to lead you away in shackles, it will slow the process of you receiving your tax refund.
In addition to the education suggestion, it is also a good idea to use a little common sense when you are given tax advice. Often people sound very intelligent as they spout off IRS tax-avoidance scams. When you are in search of tax education, know your source. Verify who you are getting information from and the accuracy of what they are saying. If it sounds too good to be true, it very likely is. However, if you go to another tax professional and are told the same thing, you can probably rely on what you have been told. If another educated and knowledgeable person says you have lost your mind, you may want to rethink the tax strategy.