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Know Your Rights, But File with Care

Know Your Rights, But File with Care

Know Your Rights, But File with Care

Published: March 29, 2015

In June 2014, as part of its ongoing effort to improve communication and service, the Internal Revenue Service issued a formal Taxpayer Bill of Rights. These rights are not new, but they were scattered throughout the tax code, and surveys have found that most taxpayers did not even know they had rights when dealing with the IRS.1

Although you might be more comfortable understanding your rights, it’s important to remember that the “gentler, kinder” IRS remains vigilant in auditing returns for accuracy. Here are some tips that might help you stay out of the 1% of individual returns that are audited annually.2

Check your math and personal information. Although a math error may not lead to an audit, it can call attention to your return. The same is true for entering incorrect personal information such as the wrong Social Security number or forgetting to sign your return.

File forms on time. Missing a filing deadline often leads to a response from the IRS (although not necessarily an audit). Even if you file an extension, you must pay all taxes due by the regular filing deadline.

Report all income. You may have income not reported on your W-2 form. These sources might include investment income, interest, royalties, rent, compensation as an independent contractor, forgiven debt, alimony, tips, gambling winnings, health insurance reimbursements (for expenses deducted in a previous year), and proceeds from sales on online sites such as eBay. Many types of income may be reported by the payer to the IRS; but even if income is not reported by the payer, it would be wise to include it on your tax return.

Use good judgment when taking deductions. Utilize all deductions allowable, but keep in mind that certain deductions tend to raise a red flag. Among the most common are home-office deductions, vehicle-expense deductions, and high-value charitable contributions. Follow all legal requirements and keep all necessary records.

Before taking any specific action regarding your taxes, you should consult a qualified tax professional.

1–2) Internal Revenue Service, 2014

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright 2015 Emerald Connect, LLC.