The IRS typically conducts audits when it detects an anomaly on someone’s tax return that could flag it for review. The odds of this are actually very low, but such odds aren’t a comfort when you know you’re being audited.
Receiving a letter from the IRS that your tax return is being audited can be stressful, and it’s natural to feel overwhelmed or frustrated. There are steps you can take to make sure you understand what the IRS is requesting, how much time you have to respond, and how best to prepare for the audit.
Common Reasons Why the IRS Will Conduct an Audit
If the IRS intends to audit you, there’s a good chance that something triggered the agency’s interest in reviewing your tax return and accounting. This doesn’t necessarily mean you did anything wrong; rather, there are several common things that can happen with your tax return that could appear as anomalies and trigger a tax audit.
A few common IRS audit triggers include the following:
- Failing to report all income: If you don’t properly report all of your income, whether it's from investments, gambling winnings, or freelance work, the IRS will take notice.
- Making too much money: While it may seem counterintuitive to be audited for making more money than expected, if the amount is far greater than the average person in your income bracket, it can be a red flag.
- Claiming too many deductions: If you claim more deductions than would normally be expected for someone in your tax bracket and situation, this could trigger an audit.
- Home office deduction: Although this is a legitimate deduction that can save taxpayers money, the IRS often scrutinizes the qualifications for claiming it, so make sure to read up on the rules before filing.
- Employer mismatch: If your employer’s reported income doesn’t match yours, you may be at risk of being audited.
- Math errors: Calculating mistakes are common in tax filings and can result in an audit. It's important to double-check all math and related entries before submitting.
If you’re being audited by the IRS and believe one these factors could be the reason, it’s important to consult with an experienced tax attorney for guidance on the next steps of the audit process.
Contact Us for Legal Assistance
An IRS audit can result in additional fines, fees, and interest, but you can avoid the worst possible scenarios with help from an experienced tax attorney. Buchalter & Pelphrey Attorneys At Law can help you understand your audit and prepare for it, which can result in a favorable outcome – especially when your audit was triggered by a misunderstanding.
For more information about how we can help, contact us online today.