Why the IRS May Audit You

Do you think you might be the target of an IRS audit? Know the red flags the IRS looks for that could set you up for an unexpected tax audit.

Are you in need of tax services for IRS audit help?

A tax audit is when the IRS double-checks your numbers to make sure you didn’t leave anything out of — or add anything in to — your tax return. If you told the truth, the whole truth, and nothing but the truth in your tax return, then you should have nothing to worry about. Even though the IRS often has terrifying connotations, there’s nothing inherently scary or evil about a tax audit.

However, if you consciously cheated the system or have tax debt, you would have reason to be concerned.

The IRS uses tax audits to minimize the tax gap. That is, the difference between what the IRS is owed in taxes and what they actually receive. Tax audits may be conducted at random, but generally the IRS chooses taxpayers to audit based on suspicious activity. If the IRS asks to levy your bank account, your funds will be put on hold for 21 days until they deduct the amount of money owed to them.

If you find yourself the target of an audit, you will want IRS audit help from a tax professional or an IRS tax attorney. The following are some of the biggest red flags the IRS looks out for that could set you up for an unexpected tax audit.

Math Errors

Unfortunately, when the IRS starts investigating your taxes, saying “oops” isn’t going to help you any. The plain fact is, you can’t make mistakes on your tax return, and this applies to everyone who files taxes.

That means you can’t accidentally write in a four instead of a nine. Don’t get distracted and forget to add that last zero. While mistakes do happen, you’ve got to double- and triple-check your papers if you’re doing your own taxes.

To play it safe, it’s best if you don’t. Hire skilled tax pros to help you and you might not need IRS audit help later.

Missing Some Income

One of the easiest ways to end up with a tax audit is to leave out part of your income when you report it on your taxes.

Even if you think you’re doing work “under the table” — such as freelance or contract work — the business you’re doing that work for probably submits all of their information to the IRS, which means they already know about that extra hundred dollars you made on the side.

Don’t try and trick the system by only reporting the income you think is obvious.

Claiming Too Many Deductions

Technically speaking, you can’t claim too many deductions as long as they’re all actually necessary for your business and only for your business.

Often people try to write off office space and equipment that they would be using anyway — such as a personal computer — even if they weren’t doing business for themselves. Before you can deduct something from your tax return, you must be able to honestly affirm that you only need that item for your business, and you do not use it for personal applications.

Reporting Too Many Losses

If you’re self-employed and filing taxes with a Schedule C, you might be tempted to hide some income by filing personal expenses as business expenses. However, finding too many reported losses on your tax return always arouses suspicion, as the IRS may begin to wonder how your business even stays afloat. Be honest the first time and you may not need IRS audit help later.

Claiming Too Many Charitable Donations

If you’ve made significant donations to charitable organizations, then you’re eligible for some well-earned deductions on your tax return. However, make sure your tax report is honest about exactly how generous you’ve been. This should be obvious, but you should not report donations you didn’t actually make. If you don’t have the right documents to back up your claims, don’t claim it.

When it comes down to it, all you have to do to stay out of trouble with the IRS is be honest and keep track of your documents. But if you ever do need help with an IRS tax audit, get in touch with Collins Legal in Houston.