In this article, we will be discussing some of the common causes of IRS audits and why you are most likely going to be served with a notice from the IRS soon. However, if you are 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 in most cases issue a letter informing you of an impending audit when there are certain discrepancies in the returns which you have filed or the documents which you have submitted. In most cases, the IRS auditing process is complex and technical and may end up with you having to pay a certain amount which may have been uncovered as unpaid taxes. To avoid this, it is essential that you pay attention to the documentation process and ensure that all the points discussed above are well taken care of.Reasons Why You Will Most Likely Be Audited by the IRS
The IRS may choose to audit an individual or a business for several reasons. Some of the reasons include;- Errors in Data Entry
One of the most common reasons why most individuals and businesses face IRS audits is because of data entry errors. When you are transferring data from one place to another, chances are high that there may be errors which may be due to human inefficiency and this may result in the incorrect computation of your income and expenses. Such incorrect computation may, in the end, affect the overall amount reported in taxes, which may turn out to 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 make the mistake of failing to report one or more of their income sources to the IRS. Doing this is heavily frowned upon by the IRS and this may lead the IRS to press fraud charges on such an individual or business. 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, as 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 is expected of you in taxes.
- Recording Exaggerated Deductions
When filing your tax returns, it is possible that you may be able to make some deductions which, 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 as this, and when this is noticed, the IRS may choose to serve you with an audit letter, wherein, they will seek to further investigate your finances and expose the fraudulent practices which you have been engaged in. Such practices as this may earn the business or individual penalties in the form of 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 what your filing status is, 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.
