Few things strike such universal fear as the prospect of an audit by the Internal Revenue Service.
But as you race to meet Tuesday's tax deadline, you can relax. The Associated Press reports that your chances of having your 2013 returns audited are lower than they have been in years. The story finds that budget cuts are straining the IRS's ability to police returns, noting that the IRS has fewer auditing agents than at any time since at least the 1980s.
Last year, the IRS audited fewer than 1 percent of all returns from individuals, the lowest rate since 2005. This year, an IRS spokesman admits that the numbers will dwindle even lower.
That said, there are red flags that can prompt the IRS to eyeball your return. Kiplinger lists a few of them. It says that while the overall individual audit rate is only about one in 100, the odds increase dramatically as your income goes up. Recent IRS statistics show that people with incomes of $200,000 or higher had an audit rate of 3.26%, or one out of every 30 returns. Report $1 million or more of income? There's a one-in-nine chance your return will be audited. Now who wants to be a millionaire?
CNN Moneywatch notes that the IRS has been cracking down on offshore tax evaders over the past few years, many of which are high-income taxpayers.
USA Today urges you to be a stickler on all the numbers you enter. A common error is not properly copying over the numbers on your tax forms. Any difference between what your employer reported you earned in and what you personally reported earned will raise a red flag, even if it's an honest mistake.
The TurboTax website quotes the IRS, which says that filing returns electronically can “dramatically reduce errors,” thereby lowering the odds of an audit.The error rate for a paper return, the IRS reported, is 21 percent. The rate for returns filed electronically is 0.5 percent.
Daily Finance warns against getting too creative with deductions. Deducting too much of your automobile expenses for business, deducting hobby losses, interest expenses, and other itemized deductions can draw unwanted attention.
Be reasonable when noting your charitable deductions. If they are disproportionately large compared with your income, it raises a red flag. If you don't get an appraisal for donations of valuable property, or if you fail to file Form 8283 for noncash donations over $500, you become a bigger audit target, so properly document everything.
In this computerized era, most individual taxpayers can't cheat on their taxes even if they try. Your employer reports your wages to the IRS, your bank reports interest income, your broker reports investment income and your lender reports the amount of interest you paid on your mortgage. If the IRS has 1099 information from a mutual fund or from a casino where you hit a jackpot and you're missing that on your return, their computers will pick it up.
"Anybody who's an employee, who gets paid by an employer, has a limited ability to take risks on their tax returns," said Elizabeth Maresca, a former IRS lawyer who teaches law at Fordham University. "I think people who own their own business or are self-employed have a much greater opportunity (to cheat), and I think the IRS knows that, too."