An IRS audit reviews an individual or organization’s reported accounts and financial statements to determine the authenticity of the information given. The audit also ensures compliance with tax laws.
Some of the reasons the IRS would audit you include:
• The existence of mathematical errors:
If the tax returns you have filed have numerical errors, the IRS will audit you. Be careful with the numbers you present in your returns to avoid mistakes.
• Reporting partial income:
An IRS audit will be conducted on you if you fail to report some of your income. They will detect the oversight as the IRS has all your income outlined on your Form 1099.
• Claiming numerous charitable contributions:
You are entitled to obtain just deductions if you made noteworthy donations to charity. However, you must have evidence to back-up your charitable contribution claims. You will be part of an audit if you report fake contributions.
• The existence of several losses on your Schedule C:
This applies to persons that are self-employed. You may account, as part of your business losses, your personal expenses. Such a measure arouses suspicion on the liquidity of your business and hence, the need to audit you.
• Claiming plentiful businesses expenditures:
You are only eligible for a tax deduction if your purchases are essential and ordinary in carrying out your professional duties and responsibilities. Leisure expenses do not fall part of this category.
• Claiming deductions for a home office:
Deductions for home offices are often mired with fraud. The deductions are only qualified if the purpose of the home office is just for business or trade. There will be an audit if you can’t prove this to be the case.
If you are looking to reduce your tax burden and want a tax relief, seek it from a relevant authority.