The IRS recently announced it will not require taxpayers to amend their returns or pay back any extra money they received in their refunds due to incorrect health care-related tax information on Form 1095-A. This is good news for individuals who may have mistakenly filed an inaccurate return.
However, the IRS is not forgiving of all inaccurate returns. In fact, some filing errors could raise a red flag with the IRS and result in a tax return being selected for an audit.
1. Misreporting Income
Taxpayers must always make sure the income on Form W-2 and Form 1099 match the reported income on their return.
2. Unusually High Charitable Deductions
Taxpayers may raise some eyebrows if charitable donations are well above average for their income range.
3. Unusually Low Salaries
The IRS takes a close look at S corporation compensation practices, particularly if the salary paid to a principal owner looks suspiciously low.
4. Wrong Social Security Number
Taxpayers must make sure to clearly write or carefully type their Social Security number to avoid added scrutiny over hand-filed returns, or the rejection of e-filed returns.
5. Claiming Losses From "Hobby" Activities
Certain types of businesses showing losses, such as horse racing or horse breeding, will often generate increased attention.
6. Ex-spouses Claiming Different Amounts for Alimony Deduction or Income
This is easy pickings. Taxpayers must report the Social Security number of their ex-spouse when reporting their alimony deduction. It should not differ from the amount the other ex-spouse claims for the corresponding item.
7. Large Amounts for Meals and Entertainment Expenses
Sizable meals and entertainment expenses for a taxpayer's business are common targets.
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