The Internal Revenue Service is watching tax returns closely, using improved computer systems to detect any potentially inaccurate returns. But for Texas taxpayers who have doubt as to liability, producing good records and calling on professionals if help is needed can produce a good result to any audit.
The IRS typically will send a letter first seeking more information if officials have spotted an abnormality from previous years. Then, taxpayers can review their returns to see if they contain any of the following nine warning signs that can trigger an audit.
- · The IRS checks previous returns and easily could detect the possibility a taxpayer is not reporting enough earnings.
- · The IRS receives copies of all of W-2 and 1099 forms, too, so the agency will match a taxpayer’s figures with theirs. If there is any dispute on such a form, taxpayers should discuss it with the employer in advance. If there is an error, an employer should send a revised version to the IRS.
- · Self employment can raise suspicion with the IRS, especially if the business claims a lot of expenses, but doesn’t bring in a lot of earnings.
- · Taxpayers cannot write off tools or equipment used in a hobby. To write off such expenses, it must be believable that a taxpayer has a product to sell and expects to make a profit.
- · Doing a few hours of work each week from home does not count. A part of a home claimed on tax returns must be used for work only. Also, taxpayers must keep careful records of any mileage or car costs claimed.
- · Including costs of meals and entertainment that are out of the ordinary.
- · The IRS always is on the lookout for people who might be unlawfully raising charitable contributions.
- · The IRS has better ways now to detect offshore accounts, so not reporting one could raise the odds of an audit.
- · Taxpayers must check and double check all figures.
Source: U.S. News & World Report, “9 Warning Signs You’re About to Get Audited,” March 7, 2012