As the U.S. struggles to recover from long-lasting economic downturn and deal with a record-breaking national deficit, the Internal Revenue Service has become increasingly aggressive in pursuing audits against taxpayers suspected of misreporting on their returns in order to avoid taxes. While the IRS traditionally prioritizes high-earners and ambitious cheats, even typical middle-class Texas residents can find themselves targeted by audit fraud cases if they are not careful. Learning about filing mistakes that commonly prompt IRS audits can be a crucial for those hoping to avoid punitive action.
Some taxpayers face audits for relatively minor, unintentional mistakes on their tax returns, particularly when mistakes involve important information. For instance, one may accidentally leave a digit off their adjusted gross income or misprint a Social Security number. Such errors are often easy to make and just as easy to miss; however, this will not prevent the IRS from pursuing the audit. Texas filers should always check each line of their return multiple times to ensure this does not occur.
Business owners are often tempted to write off expensive trips, meals and entertainment as business expenses on their tax returns, but the IRS has long been aware of the potential for abuse this poses and carefully scrutinizes filings for suspicions business deductions. This makes it crucial for business filers to keep detailed records of all their expenses and avoid trying to hide personal expenses among legitimate business costs. Similarly, self-employed taxpayers who write off deductions for home offices, even storing non-business related items in a home office, can spur an audit from the IRS.
Of course, one of the most common reasons for an audit is the simple under-reporting of income. A substantial number of filers try to avoid excessive taxes by obscuring some of their wages in order to qualify for a lower tax bracket. This means that even filers with additional income through minor freelance or temp work need to report income from such jobs as accurately as possible. If a taxpayer does receive an audit notice from the IRS, discussing the matter with a tax law professional right away is important.
Source: USA Today, “Tax tips: How to avoid an IRS audit,” Jeff Reeves, Feb. 5, 2013