Common Red Flags That Could Trigger an IRS Tax Audit
Spikes or Drops in Income
Sudden fluctuations in your income could be viewed as a red flag in the DIF program. For example, you now earn in excess of $500,000, there is a good chance that your tax return will receive a higher level of scrutiny. On the opposite end of the spectrum, if you take so many deductions to the point where you wipe virtually all of your income, you are likely to be the subject of an IRS audit.
Another common red flag for the IRS is if you fail to report income on your return. Keep in mind, the IRS receives copies of all your earnings, including:
- Employment income;
- Interest income;
- Income from dividends;
- Income from tips;
- Income from services rendered; and
- Income from casino or lottery winnings.
Another transaction that could generate a red flag which leads to an audit is making a large cash deposit or making a large purchase. For example, if you deposit more than $10,000 in cash or pay more than $10,000 in cash to purchase an item, a notice is sent to the IRS.
Duplicative or Incorrect Data
Another anomaly identified by DIF is if you and another individual claim the same dependent or you mistakenly list the social security number of another individual.
If you are a sole proprietor, independent contractor, or freelancer, you have the ability to take a number of deductions off your tax bill, including specific deductions for:
- Office expenses;
- Entertainment; and
As a result, if you wind up deducting more than what is normal for your particular profession, there is a good chance you could be the subject of an audit.
If you run a cash-based business, expect to receive a higher level of scrutiny on your tax returns. Why? Because there is a higher risk of underreported or unreported income in these types of cash-based business ventures.
IRS Tax Relief Consultants Ready and Able to Advocate for You
If you are the subject of an IRS audit or you received a notice that you owe back taxes, the highly experienced and reputable tax relief Consultants at Anderson Bradshaw are here to help. Our team of professionals have assisted thousands of businesses and individuals resolve complex tax issues and back taxes. Call us today at 877-550-3911 for a free 30-minute Tax Consultation or fill out our form to receive a complimentary Tax Evaluation.