What Triggers an IRS Audit and How IRS Expert can be a Lifesaver
Before we talk about reasons that can trigger an IRS audit and how an IRS Audit Expert can be a lifesaver, let me give a brief introduction about “IRS” and “IRS AUDIT”.
The Internal Revenue Service (IRS) is a U.S. government agency in charge of the collection of taxes and implementing tax laws. Established in 1862 by President Abraham Lincoln, the agency works under the authority of the United States Department of the Treasury, and its prime objective is the collection of individual income taxes and employment taxes.The IRS also controls corporate, gift, excise, and estate taxes, including mutual funds and dividends. People commonly name the IRS as the “tax man.”
An IRS Audit is an investigation/examination of an organization’s or personal accounts and financial statements to make sure that particulars are declared correctly according to the tax laws and to validate the reported amount of tax is correct.
There are 3 major types of IRS Audit
What Triggers an IRS Audit
There could be multiple factors that can trigger an IRS AUDIT, some are listed below:
You Earn a lot of Money: 50% of the returns audited applied to taxpayers making more than a million dollars annually. As long as you make less than a million annually, it cuts your odds of being audited in half.
Run a Cash-Heavy Business:If your business includes handling a lot of cash, there is a strong possibility that you will be audited. The IRS has discovered a trend among cash-business owners that they “neglect” or “forget” to declare about cash income that must be reported.
File a Return with Calculation Errors: Errors in numbers easily get caught by the IRS Auditors. Since nowadays tax software does all of your calculations for you, it protects you from this particular type of error smoothly.
Mix Business and Personal Expenses:Either you’re claiming travel, leisure, or all of the other kinds of expenses, you must explain a genuine business objective for these deductions. Make sure that your expenses make perfect sense proportionately to your business income. Keep your receipts and indicate the business purpose of each expense.
Take the Home Office Deduction:If you regularly work at home in an area solely devoted to your business, you are allowed to subtract some of the expenses of that space from your income tax. The IRS may dispute with you on this, but if it’s permissible and will save you enough money, you may decide it is worth the risk.
Lose Money Consistently:A bunch of people try to write off what they spend on hobbies as if they’re claiming expenses as deductions for legal businesses. If your company doesn’t show a profit for a major part of the past several years, the IRS may call you in for an audit to determine whether you’re running a true business or just gambling.
Don’t File or File Incomplete Returns:Not filing tax returns is the most irresponsible act, but Filing incomplete returns can also trigger an IRS AUDIT, even if what we missed was just a signature.
Have a Significant Change in Income or Expenses:If you showed a profit of $500,000 last year but just $200,000 this year, this could make the IRS curious and you could be audited if you show a gigantic increase by one year. That doesn’t mean you shouldn’t try to make as much as possible, just keep proper documentation.
You have Assets or Cash in Another Country:This is a major cause. The IRS is particularly interested in taxpayers who have assets and cash hidden in other countries, particularly in nations with more favorable tax laws than those in the U.S.
Use Your Vehicle for Business: Except for the costs of traveling, small business owners have a legal obligation to claim business-related auto expenses in their taxes. So always keep proper records such as mileage logs, fuel receipts, etc.
An IRS Expert can be a Lifesaver, and you can avoid all the mistakes mentioned above that can trigger an IRS Audit by taking the services beforehand by an IRS expert.
It’s essential that upon getting notice of an IRS Audit (typically a letter) try speaking with an IRS Audit expert before responding. Even if the IRS is requesting a single document, you should get an IRS Audit expert’s opinion before appealing, as it can escalate into a more critical case.
There are online Audit services available in Texas that can link you with Audit experts in Dallas, Texas, Their responsibility as tax preparers is to provide an accurate tax return, given that the information you provide us is accurate.
Another benefit of getting IRS Audit services in Texas is that an IRS Audit expert is Someone Who Knows the rules, IRS adds thousands of new rules every year. An ordinary person simply can’t cram them in time to meet the tax return deadline. With the help of an expert who keeps up with all of the new and changing rules each year, you’ll never have to worry about making a critical mistake on your taxes.
Another reason for getting IRS Audit services in Texas is that layman’s unfamiliarity with the IRS, sometimes individuals provide too much information to IRS Agents, which may ultimately harm them. IRS advises bringing in a tax expert to assist in resolving an audit. A tax counselor will provide only the limited requested information to the auditor in an organized manner, which limits the amount of information that is exposed to the IRS investigation.