Tax Audit Triggers
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Tax Audit Triggers

Looking for ways to keep the taxman from knocking at your door? Tax audit triggers are a major concern for even the most honest, hard-working American taxpayers, and with good reason.

Looking for ways to keep the taxman from knocking at your door? Tax audit triggers are a major concern for even the most honest, hard-working American taxpayers, and with good reason. IRS audits and enforcement were on the rise in 2010.

Although The Orange County Register cites an 11% increase in IRS audits in 2010, the same AP story explains that the main targets appear to be large corporations and wealthy individuals. Average Americans aren't off the hook, though; IRS enforcement revenue rose by a whopping 18% from 2009 to 2010. The increase amounted to over $57 billion in revenue.

According to the Internal Revenue Service, U.S. federal tax returns are chosen for audit when they differ from similar returns. Although the I.R.S. doesn't want to reveal tax audit triggers for obvious reasons, certain circumstances are more likely to raise red flags.

Common Tax Audit Triggers

Enter Social Security numbers and income amounts from forms W-2 and 1099 carefully. Incorrect tax identification numbers and income amounts are common tax audit triggers.

Filing late will draw extra attention to your tax return. File for a four-month extension using IRS form 4868 by April 15th if you need more time. It's important to realize that filing for an extension only covers filing a return; your taxes are still due on the 15th.

Partial payments are also tax audit triggers. It's possible to set up an installment plan with the IRS if you can't pay your entire tax bill at once.

Even sending your return to the wrong address is on the list of tax audit triggers. In 2010, some IRS mailing center addresses changed, and taxpayers no longer receive tax packages in the mail, so be sure to check the instructions for the form you're filing.

Self-Employment Tax Audit Triggers

Be especially meticulous about record-keeping if you're self-employed, since the IRS is paying more attention to this sector in recent years. Be prepared to present receipts and other documentation to back up any deductions or credits you claim.

Claims related to home offices are common tax audit triggers. Only claim a home office if it's entirely dedicated to work. If you claim automobile-related business expenses, don't include mileage for taking the kids to soccer practice or picking up groceries.

Myths About Tax Audit Triggers

E-filing is often mistakenly thought to be among the common tax audit triggers. The IRS says the opposite is true. E-filed returns are likelier to be accurate, and math errors are among the most common tax audit triggers.

Many taxpayers also think filing for an extension will cause a return to be audited. In fact, the IRS claims that extensions are a good idea for some taxpayers. An extension gives you time to obtain and gather all the proper forms and documentation. You won't be as rushed, and will be less likely to leave out the essentials.

Amended returns won't trigger an audit, although they are subject to auditing like any other return.

Tax Audit Triggers in a Nutshell

The IRS is generally looking for anomalies. If your return differs substantially from other, similar returns, it might raise suspicion. If your tax return reflects a much higher income level than those from previous years, with numerous claims for deductions and credits, it could be problematic. A change in the type of income you earn might draw extra attention as well.

Everyone wants to avoid tax audit triggers. However, filing an accurate, timely return and meticulous record-keeping will keep you out of trouble and make an audit less painful.


Internal Revenue Service: IRS Audit FAQs

USA Today: Debunking common tax myths: E-filing won't trigger an audit

CBS News: Lowering Your Odds of Facing IRS Audit

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Comments (4)

An interesting and very informative piece!

Ranked #12 in Tax & Taxes

Thanks, Daniel!

Thanks. My boyfriend was audited through the mail and had to send a bunch of copies of paperwork from the past few years because we filed for our home tax credit although we are not married. Hopefully I will never be audited just because it seems like a hassle and takes up a big chunk of time locating all the necessary paperwork.

Ranked #12 in Tax & Taxes

Yikes! What a nightmare. I think most people are more worried about the hassle of digging up old papers than anything else when it comes to getting audited.