Not every fraud artist is a sketchy identity thief or faux Nigerian prince from the dark corners of the internet. You might end up committing fraud entirely by accident if you don’t pay careful attention this tax season. Here are five common mistakes:
Filing a return with missing or incorrect information
It’s crucial to file complete tax returns — or you might be committing tax fraud. For example, if you paid thousands of dollars to attend college this year, you might be eligible to claim an education tax credit. But you must include a Form 8863 — for education credits — with your return. Forgetting to include vital data like your Social Security number — or entering it incorrectly — also can create headaches.
Incorrectly claiming the Earned Income Tax Credit
Claiming the Earned Income Tax Credit (EITC) when you’re not eligible for it is a major audit trigger. If you qualify for the credit, you can get credited up to $6,318 — but you must meet specific requirements. When filing your 2017 taxes, the EITC income limits range from $15,010 to $53,930, depending on marital status and number of qualifying children.
Abusing tax shelters
Often, accountants and wealth planners tempt taxpayers with vague or deceptive tax shelter “opportunities,” or offer “captive” insurance structures that are at odds with your company’s genuine needs, duplicate your existing coverage or provide coverage for totally implausible events. Your barbershop in Indiana probably isn’t going to get attacked by tigers, so don’t use that excuse as a tax shelter.
Claiming the wrong deductions
If you think it’s clever to take the family along on a business trip just to deduct the vacation as a business expense, think again. When April rolls around, forget about claiming your family’s side trip to Disneyland.
Some commonly misused deductions are just plain mistakes. But if you knowingly make false statements on your return, expect trouble.
Taking inflated deductions
Your chances of being audited are lower than ever. That might make it tempting to claim your whole basement as a home office deduction, but don’t. Even if the chances of getting caught are low, inflated deductions are still illegal. Don’t stretch the truth. If you think you’ll have trouble paying what you owe all at once, work out a payment plan with the IRS.