Most Common Reasons Why the IRS Could Audit You
Getting audited by the IRS is anxiety-inducing and many are often unaware of what catches their attention and how to prevent this from happening. Instead of wondering if this will ever happen to you, understand the reasons why the IRS could potentially audit you, so you can do your best to avoid it.
If you are being audited by the IRS, contact a tax law attorney who can assist you during this stressful time.
Why Would the IRS Audit You?
There are several issues that could raise a red flag for the IRS, prompting an audit. Oftentimes, audits occur simply because of simple errors that were made during the process. If you were to transpose numbers or input data incorrectly, it could easily trigger an IRS audit. If you file your taxes electronically, some of these issues can potentially be eliminated since information can be directly loaded from past tax returns. The more you minimize manual entry, the less likely you will make data entry errors.
Additionally, audits often arise because the taxpayer did not know enough about tax law to recognize that their situation required them to file additional forms. A common issue I have seen recently is that the IRS is pursuing taxpayers who received health insurance through the marketplace. Receiving discounted health insurance coverage through the marketplace means the taxpayer is receiving an advance payment of the Premium Tax Credit. The taxpayer is required to file Form 8962 to reconcile and confirm if they qualified for the credit they already received through discounted health insurance premiums. Many taxpayers do not realize they need to file that form, which leads to adverse action from the IRS. This and similar issues can be avoided by having your taxes prepared by a qualified tax preparer who is up to date on changes in the applicable tax laws. Scaringi Law offers tax preparation services.
Aside from these errors, there are numerous other problems that can alert the IRS’s attention:
- You did not report all of your income: It might not seem like a big deal, but leaving off even a few dollars from the total income you earned can trigger an audit. Keep in mind the IRS will receive copies of the income reporting forms that you received, including your W-2, Form 1099, foreign bank accounts, and all other forms of income. It would be pointless to attempt to leave some of this unaccounted for to decrease your taxable income.
- You used the wrong filing status: This is not usually challenging for most, but if your spouse is self-employed, or does not work at all, it might be a little difficult to know what your filing status should be. If you were recently divorced and changed your filing status, this might also catch the IRS’s attention.
- You claimed dependents you do not actually have: Whether you are trying to scam the IRS or are making an honest mistake due to split households, this can trigger an audit by the IRS. Child custody can make this particularly confusing so make sure you understand which parent can claim the kids as dependents.
- You are self-employed: The IRS looks even more closely at those who are self-employed, so make sure you are accurately filing your taxes. If you have not been reporting a profit for the past three years, chances are you will get audited since this might raise suspensions that you are using this status as a tax dodge.
In addition to looking at red flags, IRS also does some random audits every year. Even if you do everything right, there is still a possibility you could be subject to a random audit. You may think, so what? If you did everything right, what is the harm of having a second look? An adverse auditor could put you in the position of having to defend even your appropriate filings and deductions. If you do not know how to properly defend yourself, you could end up owing the IRS more than you should have to.
Contact a Tax Attorney at Scaringi Law Today!
If you are facing a tax audit, you need to contact the team at Scaringi Law today for the help you need during this overwhelming time. Our tax law attorneys have the experience and knowledge that is necessary to tackle these issues, so you can move forward with your life, unburdened by the weight of your worries and fears.
Contact Scaringi Law today at (717) 775-7195 to ask about a complimentary case review and find out more about the services we provide and how we can help you.