Tax audits are one of the things that American taxpayers
dread and fear the most. Even if you’ve been honest, the thought of someone
going through your finances with a fine-toothed comb, just looking for mistakes
for which to penalize you, is more than a little scary.
And, while there’s no foolproof way to avoid an audit-
sometimes, they just happen- there definitely are things you can do to reduce
your chances of being selected for an audit. The IRS has certain “red flags”
that it looks for, flags that, if it spots them, urges officials to pay more
attention to your tax forms and filings.
By making yourself aware of these red flags and ensuring
that none of them apply to you, you can greatly reduce your risk of getting
audited.
Unreported Income
One of the easiest ways to find yourself facing an audit is
if you have unreported income. If you’re getting paid from any organization or
individual, expect that income to get reported back to the IRS.
The IRS will match up any reported income to your tax return.
And, if your tax return doesn’t contain all income you’ve earned, you’re
practically begging for an audit. In other words, make sure your records and
the income you’re reporting matches up with all of the documentation the IRS
has on you!
Too Much Money
If you’re like most Americans, then you probably think
there’s no such thing as “too much money.” As far as the IRS is concerned,
though, there definitely can be. If you’re earning more than $200,000, you have
a much greater chance of getting audited than someone who earns less.
That may not be fair, but it’s true. The IRS knows that
people who earn higher amounts of money than average are likely to owe more in
taxes, thus equaling a greater profit for the IRS, and that they’re more likely
to make “mistakes” on their tax forms.
So, if you earn above the $200,000 mark, you’ll definitely
want to be extra careful to report everything correctly. That way, if you do
get marked for an audit, everything will be on the up and up, keeping you out
of trouble.
Not Reporting Foreign Assets
Finally, if you have foreign assets, be aware that, these
days, you are required to report them, not just to signify that you have them
by checking a box, which is the way things used to work.
The rule of thumb is that you have to report any assets
worth $50,000 or more on Form 8938. If you don’t, the IRS will find out about
it due to required reporting from foreign agencies, and when it does find out,
it’s likely to go after you with an audit.
As you can see, there are all kinds of behaviors that put
you at risk for an audit. Reduce your risk by being honest, making smart
choices, and working with a knowledgeable tax adviser that you can trust.
No comments:
Post a Comment
I welcome your comments here :)