Are you an investor worried about a tax audit in 2017? If so, you can exhale now, because the odds of being audited are surprisingly low. (And if an audit happens, it's not likely to be very traumatic, either.)

Better still, there are things you can do in order to reduce your likelihood of being audited. Here are three tax mistakes that can get investors audited by the IRS.

Man at desk with papers, head in hands

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The odds of a tax audit

Let's start by setting the stage, though. Just how unlikely are you to be audited? Check out this table:


Percent of Total Returns

Percent Audited in 2015

All tax returns



No adjusted gross income (AGI)



$1 to $24,999



$25,000 to $49,000



$50,000 to $74,999



$75,000 to $99,999



$100,000 to $199,999



$200,000 to $499,999



$500,000 to $1 million



$1 million to $5 million



$5 million to $10 million



More than $10 million



Data source: IRS Data Book, 2015. 

Clearly, if your earnings fall between $25,000 and $200,000, as most of ours do, you're unlikely to be audited. The odds are actually less than 1 in a 100.

Still, what mistakes should investors (and other taxpayers, for that matter) avoid? Here are three biggies.

IRS employee at desk with nameplate that says "IRS auditor," looking mad and pointing at viewer

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1. Don't fail to file a return -- or report having no income

If you fail to file a tax return for any reason, the IRS may contact and question you. Even those with no income or no taxes due need to file a return, explaining that they have no income and/or demonstrating that they have no taxes due. Your odds of being audited are higher if you report no income -- even if you've filed a return. According to the table above, they're close to 4% (which is 1 in 25, and still unlikely).

2. Don't be messy or make mistakes

Your teachers in school may have given you poor grades for errors and sloppiness in your homework -- and the IRS frowns on that, too. In fact, if its computers or workers can't tell, say, whether you've written a 6 or a 0, your return may be flagged for a closer look. If the IRS', math differs from yours, that can also trigger an audit.

Be sure that any numbers you're entering in your return are correct. Double-check your math and be sure you're entering correct numbers in the correct boxes. One way to improve the accuracy of your return is to use tax-preparation software instead of preparing your return by hand, and to electronically file your return. Remember to sign your return, too -- as unsigned returns can also draw the attention of the IRS.

The IRS needs to be able to make sense of your tax return, so if it has any trouble reading it, that can draw attention.

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3. Don't omit required information

Finally, and this is especially important for investors, don't leave out any required information -- such as data from the 1099 forms your brokerage and other financial institutions will send you. Failing to report any income or omitting any other information can raise flags at the IRS and get you audited. It might just be a seemingly inconsequential dividend payment that you didn't want to bother mentioning, but it needs to be included -- not only because it's the right thing to do, but also because the IRS will probably already know about that payment to you and will be wondering why you haven't mentioned it. Entities that pay you generally report having done so to the IRS -- whether they're reporting salary payments, dividend income, interest paid, or something else. The IRS then expects your return to include all of these payments.

More tax mistakes to avoid

There are other ways to get in trouble, or at least get audited. These include being dishonest (by stretching the truth or claiming deductions you can't substantiate) and using a problematic tax preparer. A well-meaning relative who prepares your return might make mistakes that could get you audited. Even a professional preparer can make mistakes -- and, worse, unscrupulous ones can be committing fraud with your return in order to lower your taxes, or they can even be stealing from you. 

Red stoplight in front of building with plaque that reads "Internal Revenue Service"

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Ultimately, you're the one responsible for your tax return. Don't give up on using a qualified preparer, though, as they can often help you save much more than they cost you, as they're up to date with new tax rules and effective tax strategies. Good ones can serve you well and reduce your tax bill.

Why you needn't worry about being audited

Even if you are audited, it's typically not a big deal and shouldn't stress you out too much. About 70% or more of audits are conducted through the mail, not by requiring you to nervously sit across a desk from an IRS agent. And many audits actually result in additional money coming your way, too. Audits can seem scary, but they're not usually a problem if you've been honest.

The more you learn about taxes, the more money you can likely keep in your pocket and out of Uncle Sam's.