When Will The IRS Audit You?

The word “audit” can be a terrifying word for most of us. We never want to get ourselves in a situation where we’re dealing with the IRS. However, what’s even worse is dealing with the IRS over a tax audit. If you feel you might be at risk for a tax audit, contact a tax attorney immediately. The experts at Platinum Tax Defenders have a team of tax attorneys waiting to help. Tax audits can be a scary thing, so it’s helpful to work with someone who knows the IRS in and out. Receiving a notice of review from the IRS can cause you to panic. You might be picturing yourself broke or worse, in jail. However, before we jump to conclusions, let’s talk about the reasons the IRS may audit you.

Data Errors

Believe it or not, a small error could tip off the IRS and lead them to look into your account. A simple mistake can prompt an IRS audit, such as entering your social security number incorrectly or misspelling your name. Electronically filing your taxes can often eliminate some of these errors. When you file electronically, you can directly load important information from your W-2 and past tax returns. Electronic filing can also help you with addition and subtraction errors. To prevent any mistakes on your taxes, use a reputable tax preparation service like Platinum Tax Defenders.

Income not reported

It might not seem like a big deal to leave a few dollars from your total income off your tax returns. However, the IRS receives copies of the same income reporting forms that you do. So, if you’re reporting incorrect information from your W-2, the IRS will know. The IRS also receives information about alimony, K1 income, and foreign bank accounts. Therefore, leaving any extra money received from your tax returns isn’t a good idea.

Additionally, the IRS compares your income from year to year. If the IRS notices a discrepancy without information backing it up, they’ll take notice. You can contribute to your audit risk by leaving out wages, self-employment income, bonuses, and other income. Be truthful and report all your income, and your chances for being audited will significantly decrease.

Overstating Deductions

The IRS sees red flags when it comes to charitable deductions, business expenses, and home office deductions. If these deductions are out of proportion to your income on the previous year’s return, the IRS will be alerted. It’s good to donate to a charity. You should feel good about giving. However, don’t ruin it by overstating how much you gave, or the amount you claim for donating items like cars. Make sure you always get a receipt whenever making a charitable donation and submit it with your tax return. Also, if you’re a business owner, make sure that your business expenses make sense and are accurate. Keep receipts for any significant costs. Claiming a home office can lead to a tax audit. However, the rules for home office deductions have been made easier. Check with a tax professional if you have questions on deductions.

Filing under the wrong status

Sometimes it’s challenging to determine what your correct filing status should be. Figuring out which status to file under can be especially tricky when you’re married, and one spouse either doesn’t work or is self-employed. A trusted tax professional can guide you in making the right choice. If you suddenly change your tax filing status, that will also put the IRS on alert. As an example, if you’re recently divorced and file as single or head of the household, the IRS may look into your situation. Be prepared to answer them when they come knocking.

Don’t have children? Don’t claim them

Some people may think they can get away with claiming dependents on taxes even if they don’t have them. Also, you can’t claim your pets as children. However, it could also be an honest mistake. Maybe your household is split, and you and your spouse are both claiming dependents on your taxes. Figuring out who can claim the children as dependents when you’re divorced can be confusing. The IRS provides guidelines to help you decide whether or not someone is your dependent. The IRS will know if you’re lying and they will audit you.

Earned Income Credit Claims

The IRS created the Earned Income Tax Credit for those with low incomes. There are many rules about when you can claim EITC. For that reason, the IRS is meticulous about ensuring only those who qualify can receive the credit. Speak with a tax professional on whether you are eligible for the Earned Income Tax Credit. If you claim this credit, even in error, the IRS will flag your return for an audit.

Self-employed individuals

The IRS looks at those who are self-employed more closely. If you fail to report a profit for at least three out of five years, the IRS will surely investigate you. For businesses with excessive losses, the IRS may look at it as a hobby and disallow the tax deductions. It’s especially crucial for business owners to seek out the help of a reputable tax firm when handling taxes.

The error between the individual taxpayer and corporate filing associated with the taxpayer

For shareholders of corporations, the IRS may compare your tax return to that filed by the corporation. In doing so, the IRS will make sure the filings are consistent. Make sure what you report on your tax return matches that of the company’s filing. If the IRS finds a discrepancy, they may audit you.

Depending on your circumstances, a tax audit may be unavoidable. However, the best thing you can do is be as prepared as possible. Make sure you submit your tax forms truthfully and accurately. Additionally, seek out the help of a tax professional who can look over your forms for you and find any mistakes.

At risk for a tax audit? Call Platinum Tax Defenders today!

If you’re at risk for a tax audit, it’s a good idea to get in touch with a trusted tax attorney asap.

A tax attorney can directly negotiate with the IRS on your behalf, so you don’t have to. Going through a tax audit can leave you in bad financial shape. The IRS only wants to get what money you owe them. When you hire a tax resolution professional, there are other methods you can use to avoid or effectively navigate a tax audit. Call Platinum Tax Defenders for a free consultation today. We also have a team of CPAs waiting for your call who can help you prepare your taxes accurately and truthfully.

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