Proper tax preparation is a complicated and precise process. After filing a return, the Internal Revenue Service (IRS) determines if there are any discrepancies. When there are, they investigate to ensure accuracy. By learning the most common reasons for an audit, you can prevent one when the next tax season rolls around. 

What Tax Errors Usually Lead to Audits? 

1. Deduction Mistakes 

Individuals and business owners are entitled to deductions to relieve their tax burden every year. For that reason, the IRS scrutinizes deductions to make sure they're accurate and deserved.

The IRS will compare your current return with the one filed last year. An audit is more likely to occur when there are noticeably larger deductions attributed to charitable donations, business expenses, or home office maintenance. 

It can be easy to overstate the deductions accidentally. To remain accurate, keep receipts and other forms of proof.  

2. Mathematical Errors 

Even those with a knack for math can make mistakes that are difficult to find, even when re-checked. No matter the error's size, the IRS will commit to an audit, which is why most individuals rely on tax preparation professionals rather than file a return themselves. CPAs remain updated on tax codes and know the common areas where mistakes get made. When you hire a CPA to prepare your taxes, you'll pay the correct amount of tax, not a penny more and you'll have piece of mind knowing your tax preparer has your back when it comes to the IRS.  

3. Claiming Dependents On More Than One Tax Return 

Recently divorced couples often make mistakes when claiming dependents. Both parents usually claim their children on their respective returns even though they're no longer filing together. This creates confusion that the IRS will investigate through an audit. CPAs are up on the proper procedures and forms for claiming dependents so that you'll never make a mistake when claiming a dependent.

4. Schedule C Continuous Losses 

With the growth of the gig economy and increasing home-based businesses, more individuals file as being self-employed. Under Schedule C, self-employed individuals report their gains and losses. If there are too many losses, the IRS will conduct an audit to determine how the business stays afloat and more important, how you supported yourself with all those reported losses. If it's more of a hobby than a business, the IRS has special rules that will disallow the losses. Your CPA can help offer advice and steer you away from "hobby loss" trouble with the IRS.

5. Incorrect Filing Status

Filing the wrong status is a common and innocent mistake that still leads to an audit. Choosing the correct filing status can be difficult for households with one working spouse. The self-employed are also prone to accidentally ticking the wrong box. 

Alterations to your filing status may also trigger an audit. Recently divorced individuals will change from joint filing to single or head of household status. The sudden shift may cause scrutiny from the IRS. Work with a qualified tax preparer, and they'll get your filing status right the first time. 

With tax preparation professionals' help, you can rest assured that the audit process will be streamlined and won't occur again. For individuals and business owners in Greensboro, NC, the CPAs at Fresh Start Tax Resolutions live up to their name. They provide IRS representation to help conclude audits faster. When tax time comes around again, they'll ensure your filing is correct and mathematically sound. For more information on their services, visit their website. To schedule a free consultation, call (347) 210-2799.