1. Overestimating Donated Amounts

The IRS encourages individuals to donate things like clothes, food and even old automobiles to charities. It does this by offering a deduction in return for a donation. However, the problem with this system is that it is up to the taxpayer to determine the value of goods that are donated.

As a general rule, the IRS likes to see individuals value the items they donate at anywhere between 1% and 30% of the original purchase price (unless special circumstances exist). Unfortunately many, if not most, taxpayers either aren’t aware of this, or simply choose to ignore this fact.

2. Math Errors

While this may sound simple, many returns are selected for audit due to basic math errors. So when filling out your tax return (or checking it after your accountant has completed the form) make sure that the columns add up. Also make sure that the total dollar value of capital gains and/or losses are properly calculated. Even a small error can raise eyebrows.

3. Failure to Sign the Return

A large percentage of folks simply forget to sign their tax returns. Don’t be a part of that number! Failure to sign the return will almost guarantee that it will receive additional scrutiny. The IRS will wonder what else you might have forgotten to include in the return.

4. Under-Reporting Income

Tempting as it might be to exclude income from your tax return, it is vital that you report all money that you received throughout the year from work and/or from the sale of an asset (such as a home) to the IRS. If you fail to report income and you are caught, you will be forced to pay back-taxes plus penalties and interest.

The IRS is becoming increasingly vigilant about closing the Tax Gap. They are checking small businesses to make sure that all income is reported and that deductions are legitimate. And more. Learn about six areas the IRS pays careful attention to and how to minimize your chances of being audited for these practices.

5. Avoid Mixing Business and Personal Activities.

The biggest mistake most small business owners make is not separating business activities and finances from their personal finances. Here are some reasons why you should not mix business and personal as well as tips for keeping the two separate.

In short, it’s better to be safe than sorry. Make sure you report all of your income.