Being randomly selected for an audit is, to say the least, never something you want to be chosen for. You may end up receiving a notice of an audit because your tax return is missing a great deal of information. An audit may also happen if your return has questionable items or if the amounts included in the return are exceptionally large.
The reality, though, is that you can safeguard yourself against a state audit in a few ways. Below, read our tips on how you can avoid a New York State tax audit.
1. Be Careful About Your Business Expenses
An area that is frequently audited is the income you report as a self-employed person. Why? Taxpayers have a slew of opportunities to fudge these figures, such as underreporting their income or overstating deductions.
How can you protect yourself from a New York State audit? Scrupulously record your business’s entertainment, business-related meals, travel, computer, and phone expenses. Additionally, be careful about expensing items like research trips, as any deduction that looks like a personal item might undergo greater scrutiny. Don’t write off equipment unless you’re periodically earning income as a result of using it.
2. Include all of Your Independent Contractor Income
Avoid omitting any of your independent contractor income when you file your tax return. If you do, you can expect to be flagged. That’s because government officials receive copies of the forms you receive stating your independent contractor income. If you don’t report these figures on your return, the government will get in touch with you about them.
3. Be Cautious When Tracking Your Charitable Donations
If you deduct large charitable contributions—for example, around $20,000—this can make government officials suspicious if you don’t have a sizeable income to match it.
If you do give a lot to charity, don’t be bashful about how much you deduct. Just make sure that you have a strong paper trail to support it. Keep a dated receipt for any cash gift of at least $250 that you give to a charity, as well as for any noncash item donated, like clothes or furniture. Note that written appraisals are needed for any items you donate that you claim are worth over $5,000.
4. Explain Away
If you believe that your tax return may raise a New York State tax audit flag, it’s worth considering adding additional worksheets or forms to substantiate any and all details. These tools may be helpful for explaining any inconsistencies from prior years’ returns.
5. Avoid Amendments
Filing an amendment to a tax return is generally not advisable and is a surefire way to get on the government’s radar. This increases your chances of having your original tax return scrutinized. Be diligent about getting your tax return right the first time to avoid a New York State tax audit.
Handle New York State Audits with Confidence with a Tax Attorney for IRS Audits
If you’re currently facing a New York State tax audit, don’t get discouraged. At Delia Law, we have extensive experience with helping taxpayers to navigate the process of dealing with both federal and state tax audits.
Our main goal is to help you to achieve the most personally favorable outcome possible in light of the circumstances surrounding your tax situation. Get in touch with us today to find out all of your options for addressing your current tax matters.
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