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Avoid these five audit triggers

On Behalf of | Jan 19, 2023 | Tax Audits

An audit is an official review of tax filings. Those who believe they are the subject of an audit likely have a lot of questions. Some of the more common are discussed below.

How will I know if the audit is an official tax audit?

Be wary of a text message, email, or contact through social media. The IRS will reach out with official correspondence through the mail.

Why am I getting audited?

Some audits are initiated by random selection, others the result of specific concerns. Five common examples that can increase the risk of an audit include:

  • Income. The IRS will closely review income. A failure to report income will lead to a closer look. A good rule of thumb: if you got a W2, 1099, or other tax form, so did the IRS. Report the income to avoid scrutiny.
  • High income. The feds will also look more closely at high income earners. The risk of an audit triples for those who earn $1 million or more.
  • Deductions. The IRS has invested in software that applies algorithms to tax filings. One of the things these programs look for is a discrepancy between deductions and income. If the deductions taken do not line up with national averages at the reported income, the program will flag the filing for additional review.
  • Failure to report foreign assets. The US governments has strict rules about reporting foreign assets. It is not uncommon for the IRS to request records from foreign institutions. If the IRS finds unreported assets they could move forward with criminal charges.
  • Clerical error. A typo or simple mistake can also trigger an audit.

Businesses owners are also at an increased risk of audit. This is largely due to the variety of deductions available for those who own their business.

How can I survive an audit?

Having records is important. This can include receipts from business trips and a letter from a charitable organization to confirm a large donation.

It is also important to note that you do not have to go through the audit on your own. Taxpayers have rights, one of which is to have representation present to help better ensure their rights are protected throughout the audit process. The attorneys at Goldburd McCone have experience guiding individuals and businesses through the audit process and can put this experience to work for you.