How do I get my refund faster? Can I avoid an audit? Tips from a California tax attorney

Tax filing deadlines are now set, so it’s time to get started crunching numbers if you haven’t already.

The final day to file your 2021 tax return is April 18, but with the pandemic and limited resources, the IRS is urging people to prepare and get organized.

Before you dig into those tax forms, a tax attorney shared some tips with The Bee.

Have all your documents ready

Betty Williams, a tax attorney based in Sacramento, said you need to have your documents ready. This includes W2, 1099s, bank statements and documents that show income from sources other than a job.

“Not everybody gives you a 1099,” she said. “You have to know all your income whether you get a 1099 or not.”

If you have a business, be sure to have records of deposits, expenses, interest and dividends as well.

Some documents may not be ready until sometime in February. Williams recommends that people wait until they have all their documents to avoid delays.

File online

People who file online will get their refund much faster, Williams said.

You can submit your taxes online directly to the IRS using the agency’s Free File. The service does not require out-of-pocket costs and provides guided tax preparation. You can also file taxes online with tax preparation companies, such as H&R Block or TurboTax.

Double-check your math

Accuracy is crucial, Williams said.

“They can’t just do it in a hurry, make mistakes and then expect that it’s going to just fly through the radar,” she said. “It won’t.”

Williams said that the IRS will get your information regarding W2s and 1099s, and will have a computer add up the values. If your numbers don’t match with the numbers generated by the agency, an official will have to pull your file and review it.

They are so far behind from last year, she said, so miscalculations will slow everything down.

Complicated taxes? Hire a CPA as soon as possible

Figuring out your taxes can be tricky.

“The more complicated your tax return is, the more likely you might need a professional to help with your tax return,” Williams said.

People can hire a certified public accountant who will help prepare tax returns. The average cost to get a CPA draw up and submit a Form 1040 and state return without itemized deductions is $176, according to Investopedia. An itemized form could cost up to $273 on average.

If you prefer to have a CPA prepare your taxes, Williams recommends that you meet with them no later than March.

Can I avoid an audit?

Largely, audits are random and can be “luck of the draw,” Williams said.

She added that people in higher income brackets do have higher chances of an audit. Those that have businesses with high deductions for their mileage are among some of the things that can also trigger an audit.

You might not be able to avoid an audit, she said. But you can make sure your tax return is correct and that you have all the documents to substantiate your return, in case you do get audited.

Keep your receipts

You should keep your receipts and have a mileage log to record your business expenses. Other receipts that Williams recommends recording include a final closing statement if you buy or sell property, as well as receipts for home improvements.

If you have a business and you pay for advertising, rent or insurance, you’ll want receipts of that too.

Understand cryptocurrency requirements

If you’re involved in cryptocurrency transactions, Williams said you should understand your reporting obligations.

“That’s kind of a new thing this year that’s on the tax return, asking if you’re investing in crypto, so look for that,” she said.

Check before signing off

If your partner or someone else is preparing your taxes, check it through before signing it.

“You really should try to understand your tax return. I know it can get really complicated but at least look at it,” Williams said.

Any false statements on a tax return can result in prosecution.

File on time

There is a penalty for filing late, as well as for paying your taxes late. Williams advises that people file their taxes on time, even if you know you can’t pay your taxes yet.

“If you can’t afford to pay, get your tax returns filed and the tax agencies will work with you on a payment plan,” she said.

This story was originally published January 27, 2022 at 5:00 AM.