Failing to Report All Taxable Income

The IRS will not be pleased all if you fail to report taxable income from wages, pensions, IRA distributions, Social Security benefits, dividends, and other sources.

They already get copies of all the W-2s and 1099s you receive, including the 1099-R and 1099-SSA and they’re good at matching numbers on the forms with the income you’ve written down on your return. The moment the computers notice a mismatch, you get a red flag.

Always report all of your income. Say you retire and want to leave your typical 9-5 job but still would like to earn some money. Perhaps you’ve decided to drive for Uber, give piano lessons, tutor, do some house or pet sitting, even sell your crafts on Etsy or eBay. The money you get is still taxable, so you have to report it.

Taking Higher-Than-Average Deductions

You shouldn’t be afraid to claim your deductions, but you should keep in mind that higher-than-average deductions may raise red flags.

The IRS will most certainly notice if your deductions are disproportionately large compared to your income. For example, a large medical expense might be worth an investigation as far as the IRS is concerned!

Even though your chances of an audit go up ever so slightly, that doesn’t mean you should pay more taxes than you really owe, so claiming deductions is crucial!