Like so many things in life, the tax-filing process has become less ‘human’ and more automated.
The initiation of an IRS enquiry is nothing personal.
That means all you need to do is type one key wrong on your computer, and you could be an IRS person of interest.
And, with the increase of ‘robo-audits,’ it’s becoming more important to leave no guesswork on your returns, because computers are incapable of giving taxpayers the benefit of the doubt.
To reduce the likelihood of being audited at tax time, here are six common reasons IRS auditors (and their computers) may be eyeing your return:
- If the form you get from your employer says one number and you input a different figure into TurboTax, you could open the door for an IRS audit. Common sources of IRS inquiries are W-2s or 1099s that do not agree with the return, so always double-check your numbers and income sources when you file.
- The IRS now uses an electronic statistical sampling system to select returns for audits, which means any items outside the usual range for American taxpayers or even from your previous personal filings could trigger a red flag with the IRS.
- Claiming dependents that have been claimed by someone else or have already filed a return and have claimed themselves is a common cause for audits. If there have been changes in your household situation, make certain any dependents are claimed on only one taxpayer’s return.
- If a taxpayer has an unusually high amount of itemized deductions given their income level, an audit may be more likely. Claiming any deductions without substantiating documentation can put you in the spotlight.
- IRS audit statistics show that roughly half of audits happen to those who report $1 million or more in income. The higher the adjusted gross income, the more likely the taxpayer is going to be audited.
- Another red flag is the lack of any income, particularly for self-employed individuals running their own business. In some cases, unprofitable businesses are either simply set up to reap the benefits of tax breaks or are significantly underreporting income – neither of which sits well with the IRS.
Specialized IRS tax problem resolution for businesses and individuals
Remember, the initiation of an IRS enquiry is nothing personal – and in fact, that impersonal nature is what sets many audits in motion. Williams & Kunkel, CPAs, LLP are committed to helping you find a fair solution to your tax issues. Working with our IRS tax problem specialists, we look carefully at your situation and outline your options to you in plain English.