Filing out tax forms is difficult enough, but becoming the subject of an audit by the Internal Revenue Service (IRS) is an even larger headache. There are steps you can take to reduce the risk of becoming the subject of an audit. One is to be aware of common triggers that result in a closer review by the IRS.
What are some common audit triggers? Four specific things that tend to increase the risk of an audit include:
- Lower income. A significant decrease in reported income will generally pique the attention of the IRS.
- Work deductions. Home office, meal and deductions related to travel can all trigger a closer review by the IRS.
- Foreign investments. Special tax forms are required for those with foreign assets. This can include everything from being a beneficiary of a trust to savings accounts in another country.
- Discrepancies. Double and triple check the final numbers before submitted tax forms. The IRS will notice if the math does not add up.
In most cases a taxpayer that is the subject of an audit will receive notification from the IRS. This notification generally comes in the form of a mailing. Be leery of any correspondence that is allegedly sent from the IRS through email, social media or via a phone call.
What should I do if contacted by the IRS? It is best not to ignore a notice from the IRS. It is wise to seek legal counsel if the contact appears to indicate a large change in tax liability to discuss your options.
