The Three Common Miscues that Could Trigger an IRS Audit

Are you or someone you know about to get audited by the IRS? Have you ever wondered why some tax returns receive an IRS audit notice, while others don’t?  The IRS doesn’t have enough personnel and resources to examine every tax return, so they rely on a variety of systems to target the returns that will generate the most revenue per hour for an auditor’s time.

Here are three common miscues that may trigger an audit:

Miscue #1: Your Tax Return Doesn’t Match Reports Sent to the IRS

The number one reason you may be called into an audit is because the amounts reported on your tax return do not match with the information the IRS receives from other sources. Not only must the amount match, it must match to the proper form and line number of the form.

Miscue #2: Not Showing Enough Income On Your Tax Return

The IRS is auditing people for not making enough money!  Many self-employed people are being audited because the IRS believes they reported too little on their tax return.  For example, you may be called into an IRS audit because you reported $30,000 of income for your business.  IRS data, based on your occupation, deductions, zip code, and family size, determined you need at least $49,000 to pay your bills. Therefore, your must have unreported income.  You will now be forced to battle with the IRS because they believe you are lying.

Miscue #3: Reporting Cancellation Of Debt Income Incorrectly

If you owes a debt and it is forgiven, the canceled amount may be reportable as income. For example, your wife loses her job and you can’t pay your mortgage any longer.  Your lender agrees to take the house back and sells it for less than your mortgage balance and forgives the difference in debt.  The difference between what your house sold for and what you owed on it is considered cancelled debt.  The lender may have forgiven the debt, but the IRS looks at it as taxable income.  This is a complex area of the Tax Code, especially when it applies to real estate, but there are a few exceptions to it being taxable.  Many of the 1099s reporting the information are also incorrect.  Most people don’t know how to sort through the mess and fix the problem, thereby increasing their odds of an audit.

At Bressler & Company, our team is specifically trained to represent you at an IRS Audit.  Most of the time, you won’t have to even appear.  We will answer all their questions; and if you do wind up owing them any money; we will negotiate it down to the least amount possible.  If you have received an audit letter from the IRS, give us a call immediately at 559.924.1225.

This article was reprinted with permission from CertifiedTaxCoach.com