Top IRS Audit Triggers
An IRS audit is something that all of us as taxpayers never want and typically want to avoid. They are stressful, alarming, and fraught with uncertainty. The Internal Revenue Service uses a combination of automated and human processes when selecting which tax returns to audit. That said, your chances of an audit or otherwise encountering IRS audit triggers depends upon various factors. Such as your income level, the types of deductions, business ownership, and whether you own foreign assets.
How To Avoid IRS Audit Triggers
Although there’s no sure way to avoid all IRS audit triggers, it ultimately reduces the risk of an IRS audit with awareness:
- Errors and omitted information. If you make a mathematical error or omit required information (such as an incomplete tax form), it could lead to an IRS audit.
- Unreported income: The IRS receives reports of most income earned by US taxpayers. Suppose you don’t report all of your worldwide income, whether wages, self-employment income, or other income; it will contribute to your risk of a tax audit or an IRS notice with additional tax due.
- Charitable donations: The IRS publishes information on the average size of charitable contributions for various income levels. If you take a deduction for an amount more significant than the averages, it could result in an IRS audit.
- Excessive expenses: Expenses, whether for business-use or unreimbursed employee expenses, must be both reasonable and necessary. Expenses claimed that appear out of the ordinary are one of the common IRS audit triggers.
- Home office expenses. Claiming expenses for your home office, while valid, is one of the most well-known red flags of IRS audit triggers.
- Round numbers: Round numbers appear suspicious and raise an audit red flag simply because they appear randomly made up.
- Foreign bank accounts. Checking the box indicating that you have a foreign bank account on Schedule B increases the likelihood of an audit. Still, non-compliance can result in stiff penalties and significant legal liabilities. The IRS continues to get information on many foreign bank accounts due to FATCA.
Our goal at Tax Samaritan is to provide the best counsel, advocacy, and personal service for our clients and educate you about common IRS audit triggers. We are not only tax preparation and representation experts but strive to become valued business partners. Tax Samaritan commitment is to understanding our client’s unique needs; every tax situation is different and requires a personal approach in providing realistic and practical solutions.
If the IRS audit triggers were unavoidable and you’ve received an IRS audit notice, it’s wise to work with the Enrolled Agents at Tax Samaritan. Please click the button below to request a Tax Resolution Quote today to explore your professional support options with your IRS audit and/or free 30-minute consultation to discuss your situation further.
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Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.