Tax Mistakes to Avoid and Keep the Taxman Off Your Back
Tax season is probably the scariest time of the year for a lot of people, especially those that have plenty of assets that IRS would love to audit. Even if you diligently file your taxes and pay your dues, you might not be entirely safe from auditing. In some circumstances, the taxman is likely to be doggedly checking up on you forever, although they normally have a set period of either 3 or 6 years, depending on what trouble you get into. If you want to get him off your back, there are some mistakes you must avoid.
Never forget to sign your return
It may seem illogical or, for the lack of a better word, stupid to forget to sign your returns, but it has been known to happen. You miss one form and the IRS would be swooping down on you like vultures to a rotting corpse. In this case, you could be audited for up to 3 years, which is a very long time to be constantly on your toes. So make sure your returns are duly signed before you submit it to IRS. Better yet, refer to an accountant who can verify and confirm that you are on the right track.
File an IRS Form 5471 if you have offshore accounts
Form 5471, Information Return for U.S. Persons with Respect to Certain Foreign Corporations. From the name itself, it is pretty obvious what this form is about. If you have ownership interest in a Foreign Corporation, it is crucial that you file this form annually. Otherwise, you will trigger an audit that can last indefinitely or until you comply with the requirement, although the statute of limitation ends after 3 or 6 years. Think of the Form 5471 as the signature in your return, until it is provided, the return will not be considered valid. The same thing is true if you have 10% ownership in any foreign company due to stocks acquired.