It’s a word that causes much anxiety this time of year: AUDIT, as in IRS. I found an article that helps explain who gets audited, why, how to avoid it and what to do if it happens. Here are some highlights:
Most audited tax returns are selected for review either because the filer is part of a target group or because a computer program selects the return. The computer system selects many returns randomly, but there are red flags that will draw the Internal Revenue Service’s attention. MSN Money
So, what are some red flags the IRS looks for?
- Math mistakes: usually spotted by the computer, a human checks it, and sometimes they let it slide. But ya nevah know, so check your math, Einstein!
- Mismatched interest & dividend reporting: Whoops! If the amounts reported in supporting documents don’t match the amounts on your return, you will hear about it!
- You’re on the IRS hit list: Too much cash income? Small business owner? Self employed?
- You have a big mouth: Going on Facebook and yakking about the big scam-ola you pulled on Uncle Sam? Not good.
- You’re exceptional: IRS computers can actually predict which returns are most likely to generate revenue from an audit, i.e. which ones are worth their time. Any big weird deductions, too much charity giving, etc. and you are likely to stick out.
- You have the wrong preparer: I knew one with papers stacked to the ceiling – you know, other people’s returns lying out in the open. Also, she had a huge parrot, which is weird.
So, what do you do if your number is pulled? Well, you read the rest of the article!