Red Flags the IRS Uses To Scrutinize Your Return
As we all know, tax time can be very stressful. Among the many causes of this stress is that there is always a concern that you may be audited by the IRS. No one wants that. The IRS has almost unlimited government resources and is tenacious and invasive in some audits. Furthermore, they can go back in time and audit older returns as well. That’s why it’s a good idea to seek out professional tax planning Houston TX.
Big Red Flags the IRS Looks For
It is well known that certain aspects of or items on a submitted federal tax return are more likely than not to be scrutinized by the IRS. Here are some of these “red flags” that can lead to an IRS audit:
- Failure to report income that you received
- Math errors on the return
- Unusually high business expenses or business deductions
- Claiming a home office deduction
- Reporting high income, even if accurate
- Large charitable deductions
Also, If you have a 401K or IRA, be careful that you do not take early withdrawals. You may be liable for an additional 10% penalty, which according to some sources is not paid in a large number of returns. Other areas that might cause more IRS scrutiny include gambling losses, alimony payments, day-trading losses, and trading in virtual currencies.
Planning Is the Key
Make no mistake, planning ahead of time is key to keeping the IRS at bay. The very fact that you plan ahead allows you to take the time to get all your “ducks in a row”. Proper planning will ensure that your documents are in order and that every legal tax-minimized strategy can be used. With competent professional help, your chances of being audited go down dramatically. A professional will also be able to back you up with accurately prepared supporting documents should you be audited.