Some Common IRS Flags for Audits by dmishesq


									Some Common IRS Flags for Audits
It's important for any taxpayer to know what entries in the tax return will lead to potential problems with the IRS. The IRS uses computer programs that will process almost all tax returns and check them for some suspicious entries when compared to the statistical average. If the system sees anything that is beyond this average, it will flag that item. All flagged entries will either be manually reviewed by an IRS employee or will be automatically dealt with by the computer --- that is, it will print out a notice that will be directly forwarded to the taxpayer. The good news is if you get audit flags, you will not be immediately audited by the IRS. It only implies that your chances of getting one are substantially increased. There are flags that could easily be avoided though. Among these is submitting sloppy and incomplete forms. Avoiding potential IRS trouble would require you to do your math calculations correctly and to provide information completely. Otherwise, the computers will get confused with the entries in your tax return and the intervention of an actual IRS agent will be required in this case. However, filing tax returns electronically will somehow solve this simple issue as the programs have math and field checkers that can identify erroneous computations and lacking entries. Another audit flag is when the IRS finds out that you didn't declare income that they have on file. Basically, if you do not record all of your income, expect an audit. Miscellaneous income, dividends and interest are normally forgotten items but these should be reported to the IRS as well. Bear in mind that the IRS gets a copy of all your W-2's or 1099's, thus, they know how much exactly you make in a year. Also prone to an IRS audit are taxpayers who declare that they are either making a great deal less or a great deal more than the industry norm. Statistically, this reason alone subjects almost 5% of all taxpayers to an audit. Also, people making more than $100,000 are 5 times more likely to be audited and to encounter IRS problems. If your tax record shows extreme rise and fall in your income level, that will again raise an audit flag. The IRS takes notice of this because they suppose that most people do not have such large differences in income levels. Usually they feel that you have underreported your income at some point. Believe it or not, having too many zeros in your tax return will cause an audit flag to be raised. For instance, most expenses are not exactly $1,000 or $500. Having this kind of figures will make the IRS think that you have been rounding up too many transaction records and you're definitely up for something. This will, at the very least, prompt the system to force an actual IRS employee to recheck your tax return. There are still many audit flags out there and the ones mentioned above are just the most common ones. However, knowing what to be careful about helps you avoid IRS trouble.

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