Ryan Vaughn identifies five IRS audit triggers: filing a Schedule C, math errors, using round numbers on profit-and-loss statements, submitting incomplete returns, and skipping tax software. The IRS pursues mistakes regardless of whether you filed them yourself or hired help.
Let's talk about red flags if you decide to file your own tax returns. We've covered a couple videos recently on if you want to file your own returns, how to do that. So now let's make you aware of certain red flags, because red flags Means you get audited. That's what the red flags are referring to. Now, I did a video last year, the video link is in the description, where I go over some red flags. Today I'm going to go over a couple more different ones. So first one, filing a Schedule C. The reality is tax returns that have a Schedule C compared to tax returns that don't get audited more often. So Depending on how your business is set up, you should consider changing that so that it is a separate tax filing. Now I know people like to do tax returns themselves. I recommend asking a tax professional for some advice on structuring your business because at a minimum you've reduced your chance of being audited, but on the flip side, or in addition to reducing your chance of being audited I should say, There's also a possibility you're going to save a lot more in taxes just by having a different entity structure. Math errors, surprisingly this still happens a lot. Now if you're using a tax software, this shouldn't happen, but sometimes it does. I've had that happen. But if you're not using a tax software and you're filling out the forms by hand, honestly I've never seen someone do that without getting a math error letter back from the IRS. And you really just don't be on, you don't want to be on the radar. So if you are going to do your tax filings yourself, I at least recommend using a software that's created for it. Using round numbers. So sometimes I'll ask a client, hey, I need your business profit and loss statement, so I need all your income, I need your expenses, and they'll come back and give me their profit and loss statement, And all their expenses end in 00. Yeah, I spent $3,000 on travel, I spent $4,000 on food, $6,000 on office supplies. Look, I know that they know that I know they made up those numbers, and if me and the client know that, the IRS knows that too. Using round numbers, not a great idea. It enhances your— it increases your chance of being audited. And then submitting an incomplete tax return. If you are missing something, that is almost a guaranteed way for the IRS to audit you. And the ones that I've talked about— filing a Schedule C, math errors, using round numbers, uh, not filing a complete tax return, so something's missing— that is all picked up by the IRS computer. So it's automatically going to get picked up. A human doesn't even have to look at that for them to generate notice to themselves, like, oh hey, this client, we might have to look at what they're, what they have going on. So if you use tax software, the chances of you filing an incomplete return go down compared to filling out the forms by hand, but at the same time, that's not always a guarantee. Using a tax professional We'll help it, so we'll help you so that there might be some forms that need to be filed along with whatever else you have going on in your situation that you may not know need to be filed. So obviously we are in the business of, as tax professionals, so I'm biased, but I think it's always a good idea to get some tax professional advice even if you want to file your return by yourself. But hopefully The last year's video and this video, you can eliminate some of the red flags if you're going to do it from start to finish. We do have a free tax packet also in the link, linked in the description below. It goes over business structure, deductions, things like that. It's free, so feel free to check it out. And remember, the IRS doesn't care if you're not a tax professional. They will come after you. If you make a mistake.
