Are You Likely to be Audited?

Red Flags for a Tax Audit

What does the IRS consider red flags?

Depending on the information reported in your tax return, you have a higher likelihood of being selected for an IRS audit. There are certain red flags which are common to those returns the IRS chooses to review, as they indicate a greater chance of the return containing a tax audit deficiency.

These red flags include:

  • High income
  • Unreported taxable income, including alimony
  • Business operations or employment typically involving the regular receipt of cash
  • Itemized deductions which are large in relation to your income or which vary significantly from the national average
  • Substantial cash contributions to charities out of proportion to your income
  • Complex investment expenses
  • Tax shelter investment losses
  • Rental expenses
  • Self-employment
  • Home office tax deductions
  • Automobile logs
  • Complex tax transactions without explanations

You also face a higher chance of being audited if you are a partner or shareholder in an audited partnership or corporation, or if you had a previous IRS audit that resulted in a deficiency. It can also happen that information is given to the IRS regarding your taxes by a third party, in some cases an ex-spouse or ex-business partner, which prompts an audit. Below are some more details regarding "red flags" for a tax audit.

High Income

If your income is higher than the state or national average, then this might seem suspicious to the IRS. More businesses are audited than individuals, but an individual with a high annual income can still look "fishy." Statistically, individuals who have an annual income of $200,000 or higher are at a higher risk of being audited than those with lower annual salaries.

Omitting Taxable Income

Whether you do this intentionally or accidentally, failing to report taxable income on your taxes is a huge red flag. The IRS will match what you send in with the information that they have on record, which includes all your employment forms. If they catch a discrepancy, they will likely audit you.

Write-Offs for Charitable Organizations

Many people charitably give throughout the year, which is an expense that can be written off. Not everyone who attempts to deduct charitable giving is red flagged, but those with unbalanced or disproportionate levels of charitable deductions might raise some questions.

Business-Related Write-Offs

A disproportionate amount of business-related write offs such as business meals, business travel etc. might raise some questions. If the IRS notices that you have an unusually high amount of business-related write offs then they may audit you.

Having a Home Office

Did you know that having a home office or working from home can be deducted? Claiming a home office deduction can be a smart move, and risk of audit should not keep you from doing so.

Law Office of A. Antonio Tomas: Miami Tax Attorney

If you receive notification of an audit or have cause for concern regarding this possibility, the Miami tax attorney from our firm can offer legal advice and represent you through the audit process.

At the Law Office of A. Antonio Tomas, P.A., we consider no audit routine. Our founding attorney will personally address your case and give you the personalized attention you need. The firm will work relentlessly to protect you from the potential adverse effects of an audit, such as a large tax bill, fines or even a criminal investigation.

Contact our Miami office if you have been selected for an audit or have reason to believe this may occur.

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