25 Stupid Things That Can Cost You an IRS Audit

This post is in: Business


Join us this Saturday for a FREE Teleseminar “25 Stupid Things That Can Cost You an IRS Audit”. Some things you may do on your report are unavoidable and just naturally higher risk. It doesn’t mean they are wrong, it just means that you need to make sure your ducks are all beak-to-tail in case you do get an audit.

We will talk about some of those things on Saturday as well as things you can do to lower your risk. But what I want to focus in on for Saturday are the stupid things that you or your tax preparer may do that will cost an audit.

Here are a few of them:

  • Math errors.

I think 2010 tax returns are going to go down in the history books as one of the years where a lot of software packages failed. This is especially true of some of the off-the-shelf tried and true favorites that people use to do-it-yourself. The problem is that Congress gave us a gift on 12-17-10 and threw a real curve ball to the IRS.

They made many important retroactive tax changes. That means the program the IRS had already done was wrong. They didn’t have some of the forms that were needed and still others needed to be changed. BUT meanwhile the retail stores were busily selling software packages so people could file their returns. The only problem is the software was wrong.

I have an expensive pro version of tax preparation software and we were still working out bugs just this past Saturday. They still don’t have some of the states finalized. And this is the software that costs the big bucks. I can guarantee if you’ve used a software package in Jan or Feb it wasn’t complete. And filing a wrong return with wrong schedules almost guarantees that the IRS is going to come back on you.

  • Saying two different things on the return.

I’m specifically talking about the Real Estate Professional status here. It’s a hot button for the IRS and there are enough problems without you adding to them by doing something not smart on your filing. Yet, I can’t tell you how many people make this mistake.

The problem? Claiming you’re a Real Estate Professional on Schedule E and then putting down a different occupation. That’s like waving a flag that says “Audit me!”

  • Not correctly reporting Form 1099s.

My most commented on blogs had to do with Form 1099-A and Form 1099-C issues with foreclosures, D-I-L, short sales and loan modifications. Those are complicated enough and likely to cause problems if you don’t have a tax prof involved who understands this issues. But there are still potential issues with Form 1099-Int, Form 1099-Div and 1099-MISC. If you get a wrong one and you can’t get the sender to correct it, report the incorrect amount and then adjust it with a footnote on the return.

I think you can tell there is a lot we should talk about. Hope you can join Megan and me on Saturday, Mar 12 during the teleseminar “25 Stupid Things That Can Cost You an IRS Audit”.


  1. Hey, Diane! We could do a similar list called 25 stupid things that can cost you a loan!

    I train small business lenders in tax return analysis and when things don’t add up, are inconsistent, or just plain old unbelievable the lender is more likely to say ‘No’.

  2. Linda, please drop me an email. We must talk!

    Diane at USTaxAid dot com. (Hope you can decipher that code designed to keep the spam bots at bay.)

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