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3 common IRS audit triggers

| Jan 25, 2021 | Audits, IRS |

The word “audit” strikes a fear in many taxpayers in Georgia and throughout the country, but the chances of an audit remain low at .04% out of all tax returns. Sometimes, the IRS checks for accuracy and fraud if the organization suspects it. However, one error on a tax return can trigger an IRS audit, which may occur for several reasons.

Math errors

Transferring numbers from paper to another medium increases the risk of errors. Leaving off a zero or making a five into a three commonly raises a red flag with the IRS. This also includes entering all even numbers, such as $400, which rarely occurs on a return. Tax payers should double-check their numbers to ensure accuracy or use a program that allows them to upload W2s.

Under-reported or non-reported income

Many taxpayers don’t think that the IRS knows when they leave off a few dollars. Even if a person gets paid cash for a job, the employer has to report payroll taxes, so the IRS will likely know about it. The IRS also compares income annually to look for large discrepancies in the amounts.

Taxpayers must file a return on incomes of over $10,000, and not filing may trigger the IRS to audit an individual. However, the IRS has been criticized for not keeping up with non-filers, especially high-wage earners who make $100,000 or more.

Taking too large of a charitable deduction

The IRS allows taxpayers to deduct charitable donations equal to 60% of their gross income, and taxpayers can donate 61% to 63% without it causing an issue. However, taking too large of a charitable deduction in proportion to income could give the IRS a reason to audit, such as a taxpayer claiming a $20,000 deduction on a gross income of $35,000.

If the taxpayer made a large charitable donation, they could save the receipt and submit it as proof. They must also value donated items themselves and report non-cash donations of over $500 on Form 8283.

Taxpayers don’t have to deal with IRS audits on their own. They may want to hire an attorney to help make a strong defense if they feel that the audit is in error.

We insist that your taxpayer rights are protected and your options are known.

Our services are confidential and are protected under the attorney-client privilege as allowed by law.