The IRS is an entity that people fear. The last thing anyone wants to do is to raise red flags to the IRS that results in them being audited. There are however certain measures you can take to reduce the chance of being put through an audit. There is a minority of IRS audits that are conducted purely on random selection by a computer, but the majority are done as a consequence of incorrect information being submitted or circumstantial information that does alert the audit system to take a closer look.
Some issues that come up are simple mistakes such as when a divorced couple both claim the same dependants on their tax returns. Other more complicated issues may be a warning sign, such as a self-employed individual having higher outgoing expenses than incoming turnover. This would obviously be cause for investigation, as it would mean that a business is continually operating at a loss and would not be a viable concern.
If you make more than $100,000 per year then your chances of an IRS audit will increase. This is due to a past history of those in this income bracket manipulating the system to show their deductions as higher than they actually are in order to lower their taxes. Yet most people don’t want to limit their income to less than this if they don’t have to just to avoid an IRS audit.
Large amounts of itemized deductions on a tax return or large amounts of contributions to non profit organizations can really highlight your return. These are areas where the IRS is really getting tough because of fraudulent claims. Make sure you are very honest about these amounts on your tax returns.
You can be sure there are plenty of agencies that report income to the IRS as well. The online age and access to your personal banking information means that if your tax return is in contradiction with information received from banks, online sites such as Paypal, and other reports then you can be sure they will be contacting you for an audit. Even if you don’t get a 1099 or a W-2 for work you did you need to honestly report that income on your tax return.
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Sometimes, however, there is nothing at all that you can do to avoid an IRS audit. Take consolation in that as long as you have done things by the book you will have nothing to worry about. If you are intimidated by the thought of meeting with the IRS though hire a representative to go with you. If you have a tax accountant many of them will work with you for no cost as part of their services. Make sure you keep all of your records for seven years though so you have proof of your claims on your tax returns.
New Target for IRS Audits
The IRS is gearing up for the next onslaught of audit attacks. This time they’re after Sole Proprietorships aka Schedule C filers.
IRS Tax Audits If you are an individual taxpayer or a business, this is the right place for you to get the IRS tax relief you have been looking for.
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