6 Potential Red Flags That Can Get You Audited?

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6 Potential Red Flags That Can Get You Audited?

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April 09, 2012

You never know ultimately what could cause you and audit once this tax season is over. Here are 6 potential red flags to avoid that could put you in hot water.

  1. You make stupid mistakes- Information has to be entered on to a tax return one way or another. If you choose to do your taxes by hand, math errors could be very costly for you in the long run if you get audited. You should consider using a tax program or a professional to avoid making addition, subtraction, multiplication, or division errors. Sometimes, you may miss filling in certain boxes as well which can be another trigger for the IRS.
  2. You have a big mouth- You should never brag to anyone privately or publicly that you pulled a fast one on the IRS. Especially with the proliferation of sites like Facebook and Twitter, the IRS has become much more intelligent in watching these sites for people who don't report income or try to fraud the Government. Whistleblowers can earn some significant rewards by turning in cheats, so be very careful about who you share your strategies with around your taxes.
  3. You didn't file your taxes- Needless to say that you should file your taxes every year. When you don't file your taxes, you could leave yourself to unwanted penalties and interest. If you don't file for multiple years, you could put yourself in a position to serve jail time as well.
  4. You have an unincorporated business (Schedule C Sole Proprietor)- Anytime you get 1099 income during the course of the year, you are in a sense a de facto corporation as a sole proprietor. A business that continues to lose money year over year may be considered a hobby especially if you don't turn a profit over three of the last five years. If the IRS audits you, they could potentially disallow the deductions.
  5. You guess on investment cost basis- No matter what investment company has your money, keeping track of your cost basis is something that you always want to keep an eye on when you do your taxes. Especially for those of you who inherited individual stock from your parents or grandparents and may have inherited the cost basis. While most of the large brokerage firms do a good job of keeping cost basis, many of the direct reinvestment dividend plans don't keep track of cost basis which may make it a nightmare to do your taxes. Don't every try to guess on this as the onus will be on your to prove you are right.
  6. You have a sketchy accountant-Hopefully you have selected an accountant or accounting firm that is above board. If your accountant promises you a quick refund before your tax return is even completed, that may give you cause to run for the door. Make sure you are not taking illegal deductions and check everything twice as you will be responsible for penalties and interest if it isn't done right.Visit to www.oxygenfinancial.net to request a free consultation with the leading financial experts for people in their 20's, 30's, and 40's in the country.Written by:

    Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

    Co-CEO and Founder of oXYGen Financial, Inc - The Leaders in Gen X & Y Financial Advice

    Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. Oxygen Financial is not affiliated with NFPAS. NFPAS does not provide tax or legal advice. This site is published for residents of the United States only. Registered Representatives and Investment Advisor Representatives of NFP Advisor Services, LLC (NFPAS) may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact NFPAS Compliance Department at 512-697-6000. PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. NFP Advisor Services, LLC makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is NFP Advisor Services, LLC liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

This site is published for residents of the United States only. Registered Representatives of Kestra IS and Investment Advisor Representatives of Kestra AS may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact Kestra IS Compliance Department at 844-553-7872.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. Kestra IS and Kestra AS makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is Kestra IS and Kestra AS liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.