The Peck Group, LC - Tax Law
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We handle every aspect of tax law: preparing tax returns, representing clients during audits, resolving IRS and state tax controversies, and creating tax planning strategies for the future.

Common audit triggers to be aware of

| Mar 30, 2020 | Audits |

As a Georgia resident, you must generally file a tax return by April 15 each year. In some cases, the IRS may decide to audit your return if it detects errors or evidence that you have attempted to mislead the government. Let’s take a look at some of the most common reasons why a return may be chosen for further examination.

Your income could be a red flag

As a general rule, the IRS believes that a person who reports a high annual income or a low annual income is more likely to attempt to evade paying taxes. In 2016, 3.25% of returns listing no adjusted gross income were audited. In that same year, roughly 1% of those who made between $200,000 and $499,999 received an audit notice from the federal government.

Something doesn’t add up on your return

The IRS will run your return through a computer program to determine how it matches up to others in your tax bracket. Using the Discriminant Information Function, the government can quickly determine if you may have inflated the value of a charitable donation. It can also determine that you might have taken a deduction or tax credit that you might not have been eligible for. If you run a cash business, you may have to explain any deposits of more than $10,000.

Your audit risk is higher when you’re self-employed

As a freelancer, you get to take deductions that employees don’t have access to. In some cases, freelancers take deductions that they don’t necessarily qualify for or can’t justify. However, if you keep good records, you shouldn’t be afraid to deduct any legitimate expenses that you incur in a given year.

If you have been contacted by the IRS, it doesn’t mean that you have done anything wrong. However, it may be a good idea to meet with an attorney before replying to a notice. This may prevent you from saying or doing anything that expands an audit’s scope.

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