Taxes pay for roads, bridges, law enforcement and public education, but some see Audits in Tulsa as an unnecessary evil. To stop fraud, the IRS (Internal Revenue Service) audits roughly 1% of taxpayers each year. The IRS’ computer system is programmed to catch oddities on tax returns, and anything outside the norm can be flagged. Read on to learn the most common things that can trigger an IRS audit.
Sloppy and/or Incomplete Returns
Arithmetic errors and omitted information make the IRS cringe. If the computer cannot make sense of the return, it will be rejected. For the lowest chance of an audit, ensure that the numbers match on state and federal returns. If a person cannot pay what they owe, they should file a return anyway, and they should pay what they can as soon as possible.
Unreported Income
It’s obvious but it bears repeating: If a taxpayer files a return but fails to report all income, they are more likely to be audited. Taxpayers must report all dividends, interest and other income, even if the payments were in cash.
Abnormally High or Low Income
If a person’s income is very high or very low, they are more likely to face an IRS audit. Those with incomes that fluctuate from one year to the next may also be flagged by the Internal Revenue Service.
Itemized Deductions
There is absolutely nothing wrong with claiming every deduction to which the taxpayer is entitled, but the filer should know that they are more likely to be audited if they claim more than the statistical average.
Self-Employment
This one is especially important for entrepreneurs. Filing Schedule C, the Profit or Loss from Business form, does not guarantee an audit. However, if a person has a small business that consistently shows losses while they hold a regular job, the Internal Revenue Service may consider the business a hobby. Home office deductions also tend to raise red flags. Taxpayers should report expenses, but they should also be prepared to document them.
The best defense against an IRS audit is honesty. Save receipts, report all income and don’t make up figures. Muret CPA PLLC can get returns ready for filing, and they can review them for obvious errors that may trigger Audits in Tulsa.
