In this article, we will discuss some of the common causes of IRS audits and why you are most likely to be served with a notice from the IRS soon. However, if you have yet to submit your returns, take advantage of this article and its content to minimize the chances of being served with an IRS audit letter.
IRS Audit
The IRS will usually issue a letter informing you of an impending audit when there are certain discrepancies in the returns you have filed or the documents you have submitted. The IRS auditing process is complex and technical and may result in you having to pay a certain amount that may have been uncovered as unpaid taxes. To avoid this, consider the documentation process and ensure all the above points are well handled.Reasons Why You Will Most Likely Be Audited by the IRS
The IRS may audit an individual or a business for several reasons. Some of the reasons include;- Errors in Data Entry
One of the most common reasons most individuals and businesses face IRS audits is data entry errors. When you transfer data from one place to another, chances are high that there may be errors due to human inefficiency. This may result in the incorrect computation of your income and expenses. Such incorrect computation may affect the overall amount reported in taxes, which may be lower than the estimated amount from the IRS.The IRS may launch an inquiry into a company or individual when minor errors like misplaced digits in Social Security Numbers are recorded.
To protect yourself from these common errors, it is recommended that you choose a competent provider of Tax Preparation Services in Roseville, CA, or choose the electronic process, which is bound to eliminate some of the common issues associated with the paper-filling process.
E-filing of the document allows you to directly load important information from past tax returns, W-2 and other necessary documents, thus, reducing the chance of errors.
- Unreported Income or Income Sources
Individuals and businesses may be tempted to fail to report one or more of their income sources to the IRS. The IRS frowns on this practice, which may lead to fraud charges against such individuals or businesses. In some cases, the perpetrator may be sentenced to jail or awarded a certain percentage as a penalty for the crime committed.Failing to report income sources to the IRS raises red flags. The IRS is exposed to the same documents as you are, and they are also in charge of comparing your income from year to year to better decide how much you are expected to pay in taxes.
- Recording Exaggerated Deductions
When filing your tax returns, you may be able to make some deductions that, overall, will lower the total amount expected of you to be paid in taxes. However, in certain cases, some individuals and businesses choose to exaggerate these figures, thus significantly reducing the amount they are entitled to pay in taxes.The IRS frowns heavily upon such practices, and when they are noticed, the IRS may choose to serve you with an audit letter. In this letter, they will seek to further investigate your finances and expose the fraudulent practices in which you have been engaged. Such practices may earn business or individual penalties through fines, levies, and other punitive measures.
- Wrong Filing Status
Some errors can be prevented when filing your tax returns, and this can be ensured when you work with professionals who render Tax Preparation Services in Roseville, CA. However, it may be difficult in some cases to determine your filing status, especially if you are married and your partner hasn’t worked in the year under review.The IRS may notice the red flag from married to single from one year to the other, thus raising suspicions that you may be trying to evade tax by declaring a different status.
