09 Aug 5 IRS Audit Triggers That Could Make You Lose Thousands
If you’re like most people, you dread getting an audit letter from the IRS. It means that your hard-earned money is on the line, and there’s nothing to stop the government from taking it. However, you can avoid getting that nasty letter by being aware of these 5 IRS audit triggers.
1- Unfiled Tax Returns
One of the most common IRS audit triggers is neglecting your previous tax returns. It’s important to keep up with your taxes each year. If you have unfiled returns from previous years, you can go back and file them. Better to do that before it’s too late.
2- Too Many Deductions
Many people spend a lot of time taking tax deductions so they’re not giving the IRS more than they need to. That said, some can get a bit carried away with those deductions. It’s important to do your homework regarding deductions so you don’t get the IRS raising its eyebrow.
3- Reporting Incorrect Income
Just fudge the numbers on your return. How would the IRS know? It might be easy to get in this mindset, but the truth is that the IRS can find those things out. If you’ve only reported $30,000 on your tax return for one year, yet went out on an expensive vacation to the Bahamas, that’s a big clue to them that something isn’t right.
4- Round-Number Expenses
One of the best pieces of advice we can give is to make sure you know exact numbers when accounting for expenses. If you’re just giving ballpark estimates (rounding numbers), like $10,000 even, then the IRS may think that you’re lying. Guesswork isn’t worth an audit, so keep track of your expenses.
5- Inconsistent Expenses
When talking about inconsistent expenses, we’re talking about how your expenses compare to the industry average. For example, if a realtor making $100,000 a year reports $90,000 in expenses, when the industry average is $40,000, that is a serious audit trigger. The IRS has piles of background information on any industry, so good luck trying to get past them.
The IRS details a few more reasons that you could be audited, so read up to make sure your hands are clean.
If you need help filing your old returns or avoiding these triggers, fill out our contact form or call us at 614-524-4888!