
Tax Day—April 15, 2025—is coming. The sooner you get this off your plate, the better, especially if you will be entitled to a refund.
Strategy: Don’t be in a rush, though. Take the time to check, double-check and triplecheck your return before sending it into cyberspace or sending it off via the USPS. Although audit rates remain historically low—less than 1% the last few years—you still don’t want to set off any alarms at the IRS.
Here are five ways to reduce the risks on your 2024 return.
1. Avoid common mistakes. IRS computers are quick to pick up inconsistencies when they match forms they receive with your tax return entries. Ditto for math errors or other inaccuracies like incorrect Social Security numbers (SSNs) or Taxpayer Identification Numbers (TINs). Even if you’re using a professional tax return preparer, you could trigger a closer examination of your return if you’ve provided the wrong information or added a 0 to a deduction. Don’t forget to include all the taxable income reflected on the 1099s you’ve received.
2. Tell the truth. This is one of those times in life when it pays to be honest. Your risk of being audited goes up exponentially if you flatout lie about income items and deductions. That’s not to say you can’t be aggressive when you’re standing on firm ground, but don’t fudge the facts. Answer this question: Can you face an auditor and stick to your story with proof to back up your claims?
3. Be realistic. You’re asking for trouble if you show deductions or credits that are outlandish or far greater than someone in similar circumstances would claim. For example, you can currently deduct cash gifts to charity of up to 60% of your adjusted gross income (AGI). But if you have, say, an AGI of $100,000 in 2024 and you’re claiming cash donations of $60,000 or anywhere close to that, it will likely raise suspicions.
4. E-file. The trend of e-filing isn’t slowing down. According to the latest statistics, about 95% of all individual returns are e-filed by tax pros and taxpayers. When you e-file your return, the odds of being audited go down dramatically, partially because there’s less chance of making math and other entry mistakes. Of course, if you use a professional preparer, they’re generally required by law to submit your return electronically, so you don’t have to worry.
5. Use a tax pro. As alluded to above, you have an even lower audit risk—but not zero— when you use a tax pro to prepare your return. Notably, you usually avoid the sort of careless errors that can lead to IRS inquiries. Plus, an experienced and knowledgeable professional can usually spot the “red flags” that signal trouble and avoid many of them in the first place. Be aware that there are three main types of audits. The most common type is a correspondence audit, where you never meet face-to-face with an examiner. Almost three-quarters of all individual audits conducted by the IRS each year are correspondence audits. The second type is an office audit conducted at an IRS office. Generally, the examiner will spend about two to four hours going over certain items on your return. The third type of audit is a field audit, where the examiner comes to your home or place of business. This is the most serious type of audit and cause for the greatest concern.
Tip: When appropriate, contact your tax pro