Home » Concerned About an Audit? Avoid These Irs Warning Signs.

Concerned About an Audit? Avoid These Irs Warning Signs.

When you get a letter from the Internal Revenue Service (IRS), do you feel like you’ve been hit with a massive tax bill? No matter how confident you are that you won’t be subjected to an audit, it’s difficult to resist.

According to CPA and tax attorney David Klasing, “what people don’t realise is that there are no human beings involved in the selection of a tax return for audit.” Pigs become fat, hogs get killed is a common expression in the field of statistical analysis, and computers do the rest.”

Here are a few things to watch out for this year when filing your taxes:-

  • Numbers are rounded up to the nearest whole number

Seeing tidy, round numbers on a tax return raises suspicions in the eyes of the Internal Revenue Service (IRS).”The IRS computer will look at that and say one of two things: Either somebody is taking numbers out of their rear end and slapping them down on the return and they’re not real, or somebody is utilising estimates,” Klasing said. “I’m talking about everything… ends in zero.”

  • Having a job where you can work from home

Many people have been working from home due to the COVID-19 outbreak, but taxpayers must be careful when it comes to itemising expenses.

According to Klasing, “I’d say the home office deduction is one that leads to a lot of audits. “You can’t deduct your home office if your employer provides you with an office to work from.” Make sure your office is solely for professional purposes, with no televisions, video games, or gaming laptops in it if you’re eligible. Only work takes place in this area, Klasing stated.

  • A pattern of offences

For the IRS, chronic delinquency might be an indicator of risky behaviour. As long as they’re not punished, tax evaders may keep using the same methods, according to Klasing. By the time they’re discovered, they’re “so far away from that line of… negligence and not understanding the law” as opposed to, “this is willful income tax evasion and they should go to jail,” Klasing said.

  • Insured Medical Care

Deducting health insurance premiums may be an option for you. Make sure you adhere to the IRS’s instructions on this matter. Your medical and dental care expenses may be deductible, but only to the extent that they exceed 7.5 percent of the amount of your adjusted gross income for the tax year.

  • Assisting the needy

Are you considering deducting a charity contribution from your upcoming tax return? Make sure you get a written thank you from the organisation if the donation was more than $250.

Individuals who claim to have donated enormous, implausible sums of money are likewise on the IRS’ radar.

  • Offshore bank accounts

Even while it’s lawful to keep money in an offshore account, it doesn’t mean that the money isn’t subject to taxation.

There’s all this obligatory reporting of foreign information,’ Klasing explains. If you have an offshore account worth more than $10,000, you must file an FBAR—a Declare of Foreign Bank and Financial Accounts—to report it to the IRS.

In order to file an FBAR, even if you have no taxable income, you must have an offshore account with a value of $10,000 or more. It’s possible to be charged with criminal offences for failing to submit the foreign information and failing to report the offshore foreign money. “They’ll get you for that.”

According to him, the government has imposed 100% penalties on offshore accounts in some circumstances.

How can you safeguard yourself?

Prepare your tax returns as if you were audited, according to Klasing, “and you should have no fear of an audit,” he said.