Even in retirement you’re forced to pay taxes, and it’s not fun. To be fair, it’s never fun to see so much of your own hard-earned money go elsewhere, but it is the way that this country works. While there might not be much you can do to avoid tax time, there are some concerns you should make yourself aware of. Even in retirement, you are likely to become the subject of an audit. There are several reasons why your return might trigger an audit by the IRS, and the hassle is never fun. To help you avoid an increased risk of an IRS audit, we’re bringing you some of the biggest red flags in the IRS’ eyes in terms of retiree tax payers.
If you miss a 1099 at some point when filing, it might not seem like a big deal. After all, the IRS will generate a bill when they notice the mistake, you’ll pay and it’ll be all right. Except then there is a higher risk you will be audited. While mistakes do happen, the IRS wants to know that’s all it is.
The IRS knows you will donate to your church, your grandkids’ schools and charities that are important to you. However, if you donate so much and don’t provide form 8283 with your information, chances are good you’re looking at an audit. Keep your paperwork, appraise everything and be sure you’re claiming the right amounts.
Making more than $200,000 per year
If you make less than this, you have a much lower risk of facing an audit. However, the IRS finds it suspicious when anyone makes more than that without actually holding a job. The risk increases to 1 in every 37 income tax returns once you reach this level of income.
Reporting rental income loss
It’s just a fact of life that rental income is a large part of income for many retirees. When you report a loss, it sends up a red flag to the IRS to make you more likely to become the target of an audit. If it’s legitimate, you have nothing to worry about.
Big time deductions
If your income and your deductions are crazily mismatched, it sends up a red flag to the IRS. However, as long as your medical expenses and other deductions are accurate and on point, you have nothing to worry about. Just be sure you keep the documentation you have so that you can prove it.
Photo by Getty Images