Are you worried why your IRS refund hasn’t shown up yet due to a possible audit? If so, you won’t know about the status of your refund until you call or get a letter from the IRS confirming a problem. A refund could just be delayed due to processing issues. Remember, if you filed electronically you have to allow 21 calendar days and six weeks if you mailed in the return, which is one explanation. In this post, I’ll explain likely reasons for that refund delay as well as how to avoid an IRS audit.
If you needed an identity protection pin and mailed in a return without it, then expect delays since the IRS will need to verify it’s your return. And if you had to verify to them it was your return, then that’s going to take nine weeks after the IRS tells you successfully verified with their “taxpayer protection program.” But this isn’t an audit; they are just normal delays.
Keep in mind that filing early without your W2’s in hand with just your pay stubs could be an issue since your income could be wrong. Sometimes employers don’t submit the W2s in a timely fashion and when the IRS gets your return the numbers don’t match up. If you don’t have the W2s and it’s after February 15 then call them. They may have it and if you tell the IRS you have an urgent need to file and they can send it out to you.
Usually the W2 and 1099 are in Get Transcripts Online under Wage & Income documents, but for the current year they won’t be online until May 19 or later. Yet, if the IRS sends you what they have it will only have federal information on it. But they still may have something you can use to file federally. And they can send the employer a letter telling them to send you your W2’s. No individual likes getting a letter from the IRS, not even employers.
How to Avoid an IRS Audit
If you have high income expect the IRS may be looking at your income a bit more closely just because there is more tax revenue at stake and gets more attention.
Taking large deductions or charitable contributions relative to your income could alert the IRS enough to trigger an audit. The contributions could be perfectly fine but just being disproportionately higher compared to your income is what can cause them to scrutinize the claim you made.
If you’re self-employed, you are more susceptible to an audit for under reporting income or taking deductions improperly. Don’t think the IRS will buy the fact the expenses you reported on the Schedule C are all legit if you have hardly any income. Remember the Schedule C and any form you submit is subject to possible review.
Can you support those expenses? Are they even legit expenses? Large home office deductions for the type of business you have would need to be supportable on your end if the IRS ever asks you for proof. Go through the instructions on the Schedule C and reviewing them is the best way not to send up a red flag.
For that matter, don’t rely on a tax preparer saying they will get you a big refund without making sure that’s legit too. Bear in mind, shady preparers pop up all the time that can put your return at risk. After all, it’s your signature on the return and exam will hit you with a fat penalty. So be realistic on the Schedule C.
Another area is claiming large credits. There are many that send up red flags like the Form 4136 for the Credit for Federal Tax Paid on Fuels. People claim that one, sometimes because some preparer promises to get them a sizeable refund. But it’s a very specialized credit. If you see some odd credit like that ask the preparer a lot of questions. Look it up on irs.gov and see if you qualify.
Also, reporting inaccurate self-employment income to qualify for the maximum credit is a sure fire way to get audited. Credits like the earned income credit rise and then fall in amounts paid by the IRS as your earned income rises and falls. Trying to qualify for the maximum credit, reporting just enough suspicious self-employment income, may send it to exam where they will want to see the numbers from your self-employment.
Claiming dependents you aren’t qualified to put on the return so you can claim a credit is another way exam may get involved too. Remember just because you filed first doesn’t make you qualified to claim the dependent. You have to meet the rules for qualification to claim that dependant in publication 501. And if the other parent beat you to the punch and claimed the child then file correctly on paper. Don’t send proof that you’re qualified with the return, but save it if exam ever asks you for it. The people processing the return will just ignore that kind of thing.
There are other red flags like having foreign accounts and income you don’t mention to avoid an IRS audit. In addition, “math errors” which are simple mistakes like a bad social security number or name that cause you to get a larger refund could also catch interest. In the case of “math errors” like putting the wrong social security number or name is likely to lower your refund and gets you a CP or computer generated notice saying they lowered the refund. But responding to the notice or just calling the IRS and giving the correct name, date of birth and social security number can usually fix that over the phone.
In the end, what you need to do is to file an accurate return with all the correct information on it. Don’t rely on your memory for social security numbers, but look at the card. Even if your return is delayed, don’t panic. It may not be an audit and that you haven’t allowed enough time. There are plenty of things other than an audit that can cause a refund delay.
Hopefully, what I shared about your refund status and tax return errors can help end your confusion on how to avoid an IRS audit.
