You probably already know that the IRS conducts more infrequent audits because of budget cuts. But you need to know that audits still happen and that your last three tax returns are subject to verification! The IRS continues to expand the usage of automated programs to recognize tax returns that require further investigation to prevent fraud.
Learning the triggers of an IRS audit is a good way which helps you to ensure that your tax deductions and claims are correct. Speaking about IRS audits, working with a reliable CPA firm in manhattan can become your best way out. A good CPA can not only help you to register your taxes and assure that all IRS audit triggers are book-based. It will also be able to implement complete documentation and information if you need to be audited. Here is the list of five IRS audit triggers you should know.
The IRS knows that people rarely use cars that they own 100% of the time for business goals. Whether you don’t get your own transport with the registration on your name, it is problematic to report that the car is used only for business. If you claim that your vehicle is 100% for business use, it will probably attract the IRS attention. So when you are applying for a high percentage, the availability of complete records becomes more important.
The IRS uses programs that test math and tax returns. In the case your return doesn’t add up, it may be noted for future reference. So it’s better to check your social security numbers and your math twice.
Less than 1% of tax returns with income of $200,000 or less are verified. This percentage increases to 10% and higher for those who earn more than $1 million. Surely, you don’t need to earn less money in order to bypass an audit! And it is expected that the higher the income you have, the greater the likelihood that you will be noticed by the IRS.
According to IRS calculations, billions of dollars of Earned Income Tax Credit claims were paid by mistake. Some mistakes are accidental, but the IRS is carefully examining EITC statements to prevent fraud. If you are applying for EITC, be sure to document how you comply with the EITC rules to submit this documentation to the IRS, if necessary.
The IRS gets your W-2 and 1099 and their systems match this information with the sums that you provide in your tax return. If you didn’t report a discrepancy like 1099 on your return, it may cause further consideration. Therefore, if you get not yours or incorrect 1099, do not neglect it. You should connect with the issuer of this 1099 and require them to report the revised form to the IRS.