Tax Audit Reviews Highlight Common IRS Audit Triggers
Standing out in society is often viewed as a positive thing. However, one area where you don’t necessarily want to attract attention is in your taxes. Unfortunately, many taxpayers end up getting burned financially simply because they did not avoid the red flags often associated with Internal Revenue Service (IRS) audits. Here are a few faux pas you should avoid to decrease your chances of getting audited by the IRS, according to tax audit reviews.
First, if you are a self-employed tax filer, you should avoid reporting losses for several years in a row. If you report losses in more than two out of five consecutive years, the IRS may want to challenge this to determine if what you’re doing is actually a business versus a hobby. This is paramount because even though business-related losses are deductible, hobby-related losses are not.
Another filing mistake that can trigger an IRS tax audit is not keeping good track of your mileage. If you report using an automobile for business use, the IRS is aware that you likely aren’t using the car for work 100% of the time. And if you do use the vehicle to commute, this expense is not deductible. So, be sure to use mobile apps and other tools to track your mileage properly.
Finally, avoid trying to claim huge deductions when your salary isn’t all that big. If you do this, the IRS may contact you to verify your claims, according to audit defense reviews. So, as a general rule of thumb, make sure that your expenses are not proportionately unusual when compared with your tax return’s reported income. Put another way, always be reasonable in the types and amounts of deductions you claim. By avoiding the abovementioned faux pas, you boost your chances of avoiding scrutiny by the IRS—and the financial consequences that may come with it.
Author: James Daniel