No Texas resident wants to face an IRS audit, which is why it pays to be careful on your tax return. Some mistakes — or even situations — can put you at higher risk for triggering an audit.
One of the top flags that triggers an audit, according to Intuit, is simply earning over $200,000. In reviewing 2013 tax returns, the IRS audited close to 4 percent of returns reporting over $200,000 in income. That’s in contrast with an audit rate of only 1 percent on returns under $200,000. For businesses, the cutoff seems to be around $10 million in revenue before audit risks go up.
You can’t avoid the above trigger by not reporting all your income, though. Intuit says unreported income is one of the easiest mistakes for the IRS to catch, because everyone who pays you reports it to the government. At the same time, it can be easy to overlook a small 1099 or W2, so it pays to double and triple check your return.
Fudging business expenses in order to boost your refund is a bad idea, too. The IRS looks closely at business expenses, especially if they run 20 percent or higher above benchmark averages. Consulting a professional about the legitimacy of your deductions is a good idea because rules change from year to year and deductions such as vehicle allowances or home office can be difficult to get right.
Foreign accounts come with strict reporting requirements, and breaking those rules can land your return in an audit. In the past, reporting requirements were simple — taxpayers simply had to note that an account existed. Now, you have to report details about the account accurately.
Keeping up with changing tax laws to ensure an accurate return can be difficult. If you do make a mistake — or end up in an audit despite an accurate return — there are option for seeking assistance with audit requirements.
Source: Intuit, “Top Red Flags That Trigger an IRS Audit” accessed Mar. 04, 2015