Tax-Return Processing:
The Internal Revenue Service (IRS) processes millions of individual tax forms each year, using a combination of electronic methods and manual processing. IRS computers flag tax returns with certain irregularities; those flagged tax returns are personally reviewed by IRS agents. The specific factors that trigger an audit are unknown, but reported aberrations and employment-related factors can increase your chances of being audited.
Tax-Return Irregularities:
If the IRS suspects you haven't reported all your income or if your reported income is lower than that of others in your profession, your chances of being audited are increased.
High tax deductions and/or a large number of deductions, particularly those concerning self-employment business expenses, are likely to be scrutinized by an IRS agent. The biggest red flags are deductions made for your home office and the car mileage you claim as a business expense. If you plan to claim either or both of these deductions, make sure you have thorough documentation.
Mathematical errors and missing information also can trigger a review of your return, though not necessarily an audit. Large variations in income from year to year and differences between your federal and state tax returns also can put you in the crosshairs of an IRS auditor.
Other Factors:
If you earn six figures or more, you are more likely to be audited than taxpayers who make less than six figures. You also are more likely to be audited if you reside in an area with a high per-capita income.
If you work in a cash-heavy occupation, such as in food service, livery or at a salon, you stand a greater chance of being audited because it is relatively easy to hide income.
If you are divorced, you may enjoy greater scrutiny as well, because some divorceés do not accurately report alimony as income.
Also, generally speaking, the more complex your return, the more likely you are to be audited.
Answered by
SV11bucksfan
at
Jan 22, 2010 07:33 PM
