Common Red Flags In Florida Tax Returns That Trigger IRS Audits
Few things in life are more stressful than receiving a notice that you are getting audited by the IRS. While it does not happen often, mistakes or inconsistencies on your tax return act as red flags and increase the risk. Florida tax-IRS attorney Ronald Cutler explains some of the common reasons behind tax audits and ways to protect yourself.
Top Reasons the IRS May Audit Your Tax Return
According to data from the Internal Revenue Service, the agency conducts nearly 600,000 tax return audits each year. While a relatively small number, considering there are over 150 million taxpayers, these audits result in as much as $30 billion in additional tax.
While some audits are random, others get triggered by red flags in a filer’s return. These include:
- Unusually high income: The IRS is more likely to audit individuals earning over $500,000 annually, as they have more complex tax situations.
- Failing to report income: If you receive W-2s, 1099 forms, or other income statements, the IRS gets a copy as well. Failing to report income can quickly lead to an audit.
- Excessive deductions or losses: If your deductions or business losses seem unusually high, the IRS may question whether they are legitimate.
- Large charitable donations: While charitable giving is tax-deductible, claiming more than the average for your income bracket could raise suspicion, especially if you lack documentation.
- High business expenses: If you claim significant business deductions, such as travel, meals, or home office expenses, the IRS may investigate whether they are truly business-related.
Ways to Reduce The Risk of an IRS Audit
While there is nothing you can do to guarantee you won’t be audited, you can take steps to minimize your chances and ensure you are prepared if the IRS does come calling:
- Keep accurate and detailed records. Maintain receipts, invoices, and documentation for all income and deductions reported on your tax return.
- Report all income sources: Include any income streams from freelance jobs, side gigs, rental properties, or other investments.
- Avoid rounding numbers: Use exact figures, as rounded numbers may signal estimates rather than accurate reporting.
- Take only legitimate deductions: If claiming a home office deduction, ensure it meets IRS requirements. If you are a busy owner, deduct only directly related expenses.
- File and pay your taxes on time: Late filings or unpaid taxes can attract scrutiny and increase the risk of a tax audit in Florida.
Facing an IRS Audit? Get Professional Legal Help From Our Experienced Florida Tax-IRS Attorney
An IRS audit is stressful, time-consuming, and could cost you significant amounts of money. Whether you need help correcting errors in your return, negotiating with the IRS, or responding to an audit request, our Florida tax attorney has the knowledge and experience to protect your rights and financial interests.
Florida tax attorney Ronald Cutler is a certified public accountant and a former FBI special agent investigating tax cases. He takes the legal actions needed to address complex tax matters and gets the best possible outcome for our clients. Request a consultation today.
Sources:
irs.gov/statistics/compliance-presence
irs.gov/taxtopics/tc509