Just receive an IRS audit notice? Why did they pick you?

Share on Facebook0Share on LinkedIn0Pin on Pinterest0Tweet about this on TwitterShare on Google+0

Reasons for Audits

If you’re one of the thousands of Americans audited each year by the IRS, you may wonder what the specific reasons are for the audit and what alerted the IRS to audit you in the first place.

Most of the audits are determined by the IRS computer system. The information on your 1099 and W-2 forms are compared to that of the tax return. It should match. If not, you will probably receive an IRS notice for audit. This starts the correspondence audit.

Click here to read or watch more IRS Problem resources.

Other elements the computer system examines include gross profit margin, too high car expenses, little or non-existent business profit, high travel and entertainment deductions, and high use of cars in the business. Any of these could flag you for an audit.

The IRS may examine you further based on:

  • Cash or tips in business
    Claims of tax shelter investment losses
    Huge figures of itemized deductions
    A record of tax deficiency and prior audit
    Large cash amounts of charitable donations
    Higher than normal business expenses for your business
    Unreported taxable income
    Complex tax transactions without explanations
    Partner or shareholder in a business

Availing of all your tax deductions may lead to an audit, but there should be no cause for alarm if you have not done anything illegal.

Some means of selection for audit are the following:

  • You are a member of a special target group: The IRS designates certain professions as in need of examination.
    You are part of a market segment specialization program: The IRS is clamping down on specific workers.
    You were audited once, so there’s a good probability that you will be audited again.
    You’ve been involved in crime: This is especially true if you have been involved in a crime that included large cash figures.
    You amended a return and claimed a refund on a tax return within three years of the due date.
    You were reported to the IRS by an ex-spouse, law enforcement, former employees, business associates, etc.
    You’re included in the 50,000 taxpayers selected to participate every 3 years in the IRS compliance measurement program.

Reasons for Audits

If you’re one of the thousands of Americans audited each year by the IRS, you may wonder what the specific reasons are for the audit and what alerted the IRS to audit you in the first place.

Most of the audits are determined by the IRS computer system. The information on your 1099 and W-2 forms are compared to that of the tax return. It should match. If not, you will probably receive an IRS notice for audit. This starts the correspondence audit.

Other elements the computer system examines include gross profit margin, too high car expenses, little or non-existent business profit, high travel and entertainment deductions, and high use of cars in the business. Any of these could flag you for an audit.

The IRS may examine you further based on:

  • Cash or tips in business
    Claims of tax shelter investment losses
    Huge figures of itemized deductions
    A record of tax deficiency and prior audit
    Large cash amounts of charitable donations
    Higher than normal business expenses for your business
    Unreported taxable income
    Complex tax transactions without explanations
    Partner or shareholder in a business

Availing of all your tax deductions may lead to an audit, but there should be no cause for alarm if you have not done anything illegal.

Some means of selection for audit are the following:

  • You are a member of a special target group: The IRS designates certain professions as in need of examination.
    You are part of a market segment specialization program: The IRS is clamping down on specific workers.
    You were audited once, so there’s a good probability that you will be audited again.
    You’ve been involved in crime: This is especially true if you have been involved in a crime that included large cash figures.
    You amended a return and claimed a refund on a tax return within three years of the due date.
    You were reported to the IRS by an ex-spouse, law enforcement, former employees, business associates, etc.
    You’re included in the 50,000 taxpayers selected to participate every 3 years in the IRS compliance measurement program.

Audits aren’t fun. Even less fun when you go alone. Looking for help with your IRS audit? Why not give Attorney Darrin T. Mish a call? The call is free at (888) 438-6474. He’s a Tampa Tax Attorney that represents taxpayers all over the United States.

Share on Facebook0Share on LinkedIn0Pin on Pinterest0Tweet about this on TwitterShare on Google+0