by Jill Schlesinger on Jan 29, 2016
Tax season is here, so it’s time to get organized. Start by creating a file called “2015 Taxes” and drop last year’s return in it. Then be on the lookout for all of the tax documents that come rolling in: 1099s and W-2s are due to you Feb. 1, while banks, investment and mutual fund companies, and lenders will all send tax documents by mid-February. (Many forms are available online earlier.)
Next up: Gather your credit card summaries, check emailed receipts, and review checking accounts for possible deductions, such as charitable donations and job search costs. Use last year’s return as a guide to what’s missing.
If this is the first time that you are hiring a tax preparer, it’s best to contact to contact him or her immediately to set up an appointment. Otherwise, you may get shut out.
The IRS provides taxpayers whose incomes are $62,000 or less with free tax prep software (called “Free File” and available through IRS.gov). Electronic filing is available to all taxpayers, however — regardless of income — and the IRS2Go mobile app and Where’s My Refund? tools let you track refunds within 24 hours after the IRS has received an e-filed return, or within four weeks after you have mailed a paper return.
If you are filing a paper return, check out Where To File for a list of IRS addresses.
One good incentive to get your act together promptly this tax season: fraud prevention. Last year the IRS acknowledged that criminals had accessed IRS.gov to steal information on nearly 400,000 taxpayers. States are also on high alert after the filing of fraudulent returns, which prompted TurboTax to halt e-filings well before Tax Day last year.
While the IRS has announced several measures the agency says will prevent tax fraud, filing early is one good way to prevent others from trying to file a return in your name.
One other anti-fraud tip to remember: The IRS never initiates contact with taxpayers about their accounts through e-mail, text messages, or other social media — so if you get an unsolicited email claiming to come from the IRS, avoid opening attachments or clicking on links, and forward it to the IRS.
For those who are fearful of an audit, preliminary data from the IRS showed that audits of individual taxpayers fell to their lowest rate in 11 years. Less than 1% of individual taxpayers — just over 1.2 million individuals — were audited in the 2015 fiscal year, the lowest share since 2004.
The main reason that audits are down is that the IRS budget has been slashed by 10% from its peak in 2010; the agency now has 22% fewer revenue agents (the folks who perform the audits) than it had five years ago.
Yet the highest earners are more likely to be audited than everyone else. Top audit red flags include: Not reporting income, a large change in income, being self-employed, and taking higher-than-average deductions.
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