According to a previous post, the IRS stated that more than 12 million taxpayers were due to file their taxes on October 15th. Of those 12 million, there will be thousands of returns that will get flagged for additional examination or audit. The following are two of the top five audit triggers that taxpayers need to be aware and avoid: Income discrepancies and Missing Information.
Income Discrepancies
The IRS will audit a taxpayer’s return if they believe it has the potential to yield additional tax dollars. Sometimes the discrepancies between the information the IRS receives from your employers (W-2s, 1099s) and what you report on your taxes are an honest mistake. However, the IRS is laser focused on calling out that mistake. This is especially true if you are either; a wealthy American who the IRS thinks has unreported offshore bank accounts or self-employed with the potential of underreporting your income. Here are some statistics that show increased IRS collections activities pay-off:
- In 2008, nearly 1.4 million Americans were audited and the IRS collected $56.4 billion in revenue. That is $7.7 billion more than in 2006 and only slightly down from 2007′s record year of $59.2 billion.
- The IRS is doing its best to curb offshore tax evasion. Since 2009, stepped up investigation efforts of offshore accounts has yielded roughly $5.5 billion in unpaid taxes and IRS penalties.
- Incredibly, the agency has accomplished these increases with fewer enforcement staff members – 20,722 in 2008, compared to 22,543 in 2007. These figures suggest the government is becoming more efficient even as it becomes more aggressive.
Missing Information
It’s hard to believe simple mistakes such as forgetting the following: signature(s), the date, Social Security number(s), and filing status could raise the potential of an audit, but it does. Whenever you give the IRS to take a closer look at your return, you invite further scrutiny that perhaps means you will pay more. Also, missing information also means it will cost you more in time and money – the return gets sent back to you to correct and your refund gets held up as a result.
If you underreported income or discovered errors on your tax return, you are strongly encouraged to file an amended return. However, if the tax return is complex, you will need to hire a qualified tax professional to prepare it for you. Don’t try to deal with the IRS on your own. You will be responsible for paying the taxes, interest and IRS penalties, on that under reported money, so it’s important to take care of IRS debt quickly before it becomes more complicated and expensive.
If you owe more than $10,000 in back taxes, have received an audit letter or are under audit, you will want to hire expert representation such as a certified tax resolution specialist to properly organize your records and help negotiate an IRS payment plan to settle your IRS problems for good.
