Hints That Could Trigger a Tax Audit

Messing around with the IRS could cost you big time and the last thing you want to deal with is a tax audit. One of the main functions of the IRS is to pinpoint those individuals that might be evading tax payments. There are a lot of people out there that are dishonest about the money they make and the tax credits and deductions they apply for. For this reason, the IRS has to do continuous research and referencing of those taxpayers that stand out in their systems. If you come up on their radar, you can most likely expect to receive a letter from them in the mail requesting further information. Phones calls or emails received from the IRS are probably scams, so it would be wise to ignore those types of inquiries altogether. If you can work around these audit-prompting signs, you can expect to stay in the clear with the big wigs over at the IRS.

If you made a whole lot more money this year than you did last year, you might be sending up red flags that will make the IRS interested in performing a tax audit. Big changes in income for taxpayers might give off the scent that you’re not honestly reporting your income. The IRS has a system for keeping an eye on data that relies on history and if you start reporting a smaller income out of the blue, you might be put on the spot for a tax audit.

Tax Audit

When you forget or don’t file certain paperwork, the IRS will get wind of it. It’s an employer’s duty to send copies of both the W-2 and 1099 forms over to the IRS and you. If you happen to lose or neglect to file those important papers, the IRS might feel moved to mark your tax return for review. Before you go through with filing, you want to thoroughly review all paperwork that you receive from your employer for errors or miscalculations. You want the IRS to have the most correct information so that there’s no question or need for a tax audit.

If you happen to be self-employed, the IRS is probably eyeing you very closely to make sure you’re not underreporting your earnings. If you’ve got a home office and you’ve claimed deductions for certain costs related to it, you better make sure you’re being honest about what you earn. The IRS might want to run a tax audit on you if your income seems to be lower than it should be for the type of home office setup you’ve got going. It’s up to you to keep everything well documented so there’s no questions about your income or the taxes you owe.

Although there are a lot of people with actual legitimate home office expenses, there are still others that want to get in on the benefits without doing any work at home. Checking your work email from home does not transform a space into a home office. A legitimate home office set up is only used for work on a regular basis. As always, it’s going to be up to you to prove that all of the expenses you list are clearly organized and backed with proof documents to satisfy the IRS. They’ve also got their eyes open for specific business expenses like dinners and entertainment costs. You can be sure that they don’t want people getting away with expensive meals for nothing.

You should make sure to be careful about writing off hobbies. If you like to make jewelry in your spare time but you don’t have a business out of it, it should be obvious that you can’t write off the expenses of beads or tools. If you don’t stand to make money from it, you can’t claim it as a deduction on your taxes.

The IRS always has its eyes peeled for those taxpayers that seem especially generous when it comes to charitable donations. A lot of times, taxpayers will embellish the amounts that they’ve given to charities to get more back later. If you make any charitable donations, it’s of the utmost importance that you hold on to the receipts so you can quickly answer any questions that arise from the IRS.

If you’ve got an offshore bank account, you can bet that the IRS is going to be even more interested in the taxes you pay. If you’ve got foreign accounts, the IRS has introduced more rigid conditions that you’ll have to adhere to. Not reporting necessary information is the quickest way to start a tax audit.

When the numbers on your forms don’t add up, the IRS is definitely going to have some questions to ask. They’ll be quick to look into any discrepancies they see, so you want to be thorough and final once you go to turn your documentation in to avoid a tax audit or other annoying circumstances.