The IRS turned up the heat last year; audits were up 20 percent from 2004. The most feared ones, a field audit in which you are required to sit down face to face with an IRS officer, were up 23 percent last year.
The best way to avoid a red flag on your return and the dreaded audit is to avoid silly errors. The biggest mistakes are incorrect math, forgetting to sign all of your forms, not stapling your W-2 to your filing and forgetting to put your Social Security number on your check. These are all missteps that can increase your chance of being audited.
The bottom line is to take the last remaining hours to double check your addition and subtraction as well as all the digits of your Social Security number.
Do not spend your refund
According to the Internal Revenue Service, the average tax refund for 2006 is up about $100 from last year -- topping out at about $2,548. Not only is this real money, but it is real tempting. It can have a major impact on the U.S. economy, with estimates of retail sales going up as much as 20 percent in March, April and May as people put their refunds toward new clothing, appliances, vacations, cars and anything else on their wish lists.
Instead of spending it, save it. With the average household credit card debt around $9,400, paying down your bill should be your highest priority. Additionally, it is a wise idea to invest the refund in an IRA or mutual fund.
If you make a one-time investment of $2,548 in a mutual fund and leave it invested for 25 years (assuming an average return of 8 percent) your onetime refund would grow to almost $17,500, a nice addition to any retirement savings fund.
Mellody Hobson, president of Ariel Capital Management in Chicago (www.arielmutualfunds.com) is "Good Morning America's" personal finance expert.