Avoid the IRS radar: Income tax brackets have shifted—Here’s how to steer clear of an audit

As the holiday cheer winds down, it’s time to refocus on the new year, and for many, that means gearing up for tax season. The IRS will start accepting tax returns between January 15 and January 31. With inflation shifting income tax brackets, it’s essential to stay informed to avoid costly mistakes or even a dreaded IRS audit.

From gathering financial records to reviewing new tax rules, here’s what you need to know to file confidently and stay off the IRS radar.

What’s New This Year?

One of the biggest updates is that income tax brackets have shifted slightly due to inflation. Before filing, check where you fall in the updated brackets. This simple step could make a big difference in your calculations.

How to Avoid an Audit?

No one wants to receive a notice from the IRS requesting a closer look at their tax return. Unfortunately, some returns are flagged for audits, and the IRS uses this process to ensure accuracy. Here are common audit triggers and how to handle them:

1. Unusually High Deductions

If you’ve claimed an extraordinary amount of deductions—especially charitable contributions or medical expenses—the IRS might want to verify them. Always keep receipts and proper documentation for these claims.

2. Skipping Income

Failing to report all sources of income is a major red flag. Whether it’s wages, freelance work, or investment income, make sure everything is accounted for.

3. Mixing Business and Personal Expenses

If you’re self-employed, be extra careful about separating personal expenses from business expenses. Improperly mixing these could lead to scrutiny.

4. Claiming the Earned Income Tax Credit (EITC)

While the EITC is a helpful tax break for many families, it’s often closely reviewed. Ensure your claim is accurate and supported by appropriate records.

What to Do if You’re Audited?

If you do receive an audit notice, don’t panic. The first step is to contact your assigned auditor. CPAs advise this to clarify what documents the IRS is requesting.

“Most audit letters are intimidating, but a quick call to the assigned auditor can make things clearer,” said Larry J. Herring, a certified public accountant (CPA).

Here’s how to stay prepared:

• Keep detailed financial records for at least three years.
• Double-check your numbers, especially if you file manually or use tax software.
• Consult a tax professional if you’re unsure about any part of your filing.

Final Reminders

Taxes for the 2024 season are due by April 15, so make sure to file on time to avoid penalties. With one in 500 tax returns audited last year, staying organized and accurate can save you from headaches.

“Keep good records,” emphasized Herring. This simple advice can help you respond confidently if the IRS comes knocking.

So, as you trade in holiday decorations for financial paperwork, remember: preparation is the key to a stress-free tax season.