Audit Red Flags – Killer Way To Trigger Audits
Audit Red Flags – A Sloppy Return?
Why this is an audit Red Flag, I don’t know. So what if you do your return by hand? My brother always does his that way and was only audited once in the last 30 years! Of course, he adds it up correctly. He writes legibly, so it’s readable (well that’s debatable, but don’t tell him I said so). I imagine that if you make it hard for the return to be processed, it will be kicked out and returned to you. I’ve seen it happen before. Maybe you’ll get audited , maybe not.
Under Reported Income
Don’t forget that the IRS matching program lets them know what W-2′s, K-1′s and 1099′s were filed on you. These records become due usually in August. This is after April 15th filing date. For the current year, it’s usually not a problem unless you didn’t keep track of your documents. If you are delinquent for a few years or more, we usually get those records from the IRS before preparing returns. We suggest that you do too.
Are Your Deductions Almost As Much As Your Income?
You will be audited, in my opinion, if after deductions it looks like you didn’t leave yourself enough money to live on. In cases like that, we add statements to returns such as “taxpayer lived on borrowed money” or “taxpayer borrowed money from family to live on”. Of course the statement should be true. Also, check itemized deductions. Excess itemized deductions can trigger the alternative minimum tax. This reduces the benefit of the excess deductions. We found that by lowering some deductions, the tax will remain the same. However, since the deductions are lower, you have less audit red flags.
Large Currency Transactions
Banks report cash deposits over $10,000 to the IRS. They also report cash deposits made within a short period of time that total more than $10,000. Just be prepared to explain the nature of this in an audit. They usually want evidence that you reported it as income. If it was not income you will have to show proof too.
Businesses That Deal In Cash
If your type of business is usually a cash business, then you are at a greater risk for an audit. Restaurants, contractors, hair cutters, etc. fall into this category. It’s safer to deposit all cash and then withdrawn money as needed. Of course we know few people who do this. If you don’t, then your need solid professional audit representation.