The IRS usually conducts audits through a random statistical formula, meaning that you should always be ready to be evaluated. If you’re managing your finances correctly and efficiently, you have nothing to worry about; the IRS will contact you by mail (never by phone) in order to alert you of the audit. This could lead to the possibility of an in-person meeting with the IRS, which is never a pleasant experience. There are a few obvious red flags that the IRS is looking for that could potentially result in an audit. Read on to see if you’re making any of these easy mistakes.
1. Unreported Income
Though you may think this is easy to keep track of, your unreported income is going to make a difference. When you have multiple sources of income, it can snowball into a large amount of unreported income at the end of the tax season. This causes the IRS to automatically conduct at least a letter audit. A professional bookkeeper can help you keep your income information organized.
2. Making Over $200,000 a Year
The IRS is interested in making a higher return. In fact, in 2015, $55.2 billion was collected through collections–their highest return comes from those who make income. Your tax return is likely more complicated the more income you earn, so the IRS may find more audit triggers. Of those who make over $1 million, 12.5% are audited. With such a high percentage, you’ll want to hire a CPA to help you conduct a flawless tax return.
3. Excessive Business Expense Deductions
The IRS has a threshold of business expenses they consider normal for each occupation. If your expenses are 20% or more over this threshold, you’re probably up for an audit. Vehicle expenses are usually passed by, but if you’ve got a lot of meals or entertainment expenses deducted, that’s a fine line that the IRS may be willing to cross.
Are you worried about being audited by the IRS? The Harding Group can ease your mind.
If you’re concerned about an IRS audit this tax season, trust the professionals at the Harding Group. Unlike other accounting firms, we never charge you for emails or phone calls and strive for open communication with our clients. Whether you are interested in business advising, tax preparation, bookkeeping and accounting, payroll services, QuickBooks training, or retirement planning, we have the expertise and years of experience to help. If you are ready to take the stress out of taxes, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, Google+, YouTube, and LinkedIn.