Tax audit sounds scary and expecting it will make your heart skip a bit. It is something that every taxpayer wants to avoid or minimize the chance of it.
Being selected does not always mean there’s a problem. The IRS uses random selection and computer screening method and matching methods. Whether your income tax return will be selected or not, always be prepared. Here are some red flags that trigger an IRS audit:
-
Failing to Report All Taxable Income
The IRS gets copies of your forms 1099 and W-2. If there is a mismatch between what you reported on your return and what was shown on the said forms, it will trigger a letter from the IRS. Always organize your documents and be sure to report all your taxable income on your return.
-
Violating the Rules on Foreign Account
If you have assets in other countries, the IRS will most probably keep its eye on you. They are particularly interested in taxpayers who have foreign assets.
Foreign Account Tax compliance (FACTA) has a strict reporting requirement for foreign bank accounts. Certain U.S. taxpayers holding assets outside the United States must report those assets to the IRS. It generally requires that foreign financial institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on with holdable payments. So, carefully comply with the law and always be prepared in case you will be selected. Keep all the necessary requirements and ask assistance from an Enrolled Agent.
-
Claiming Unusually High Business Deductions
An unusually high business deduction may raise questions from the IRS.
Keeping all the documents may not be enough. Sometimes IRS wants more detailed evidence for your expenses. So, get organized. Be sure that all expenses are necessary and ordinary for your business. Make sure also that you do not mix your personal and business expenses.
Always keep these red flags in mind . Nothing is better than being prepared. If you need assistance, FAS Bookkeeping and Tax Services offer professional services with dedication and passion to our clients. Invest in us! Our Enrolled Agent would like to help you with your tax preparation and contribute to your business growth. Contact us today at admin@fas-accountingsolutions.com or 832-437-0385.