How You Get Selected for the Tax Audit

Millions of citizens file their tax return every year. However, only a fraction of them gets under the spotlight of IRS. Do you know why and how? There are several factors that could highlight your name in the tax audit list. Inconsistency is the first thing that makes you suspicious. If your tax declaration is fluctuating every year, you are more likely to receive a notice for audit. In case, you’re making calculation errors, have unsettled tax obligations or contributing to insurances and other investment programs up to suspicious levels; don’t put your documents back into the drawer as notice for audit might be there in your mailbox.

Head of the tax audit along with the audit offices heads make preliminary analytical assessment. They also use management reports so that they check activities in economic sectors that require attention. Your high income increases the chances of getting a red flag. IRS is using a computer program known as Discriminant Index Function (DIF), to pick the accounts for audit. If your income compared to the previous year is much higher, you’re more likely to receive the letter for audit. IRS will also suspect you, if you are earning more that your wages. Moreover, if you are making investments but not reporting them to the IRS even then you should be ready for the audit.

Do you own a business? No matter what your business is: home based or large business. IRS keeps an eye on your filing. If you’re availing high deductions relief in the name of salary income in addition to home based business, IRS will analyze account with a particular attention. Moreover, you should be particular about defining your home office. The room in your home should be dedicated only for the business purposes. With sofas and LCD, you cannot make your drawing room your office. For home based business refrain from filing deductions for expensive business meal or luxury automobile for business. For example, you are showing income of $70,000 and at the same time writing off $55,000 business trip, auditor will not give it a second look.

Are you showing several dependants on you? Most of the taxpayers claim that they have numerous dependants on them and avail IRS relief. In this case, auditor will analyze your income, tax credits and expenses. If you were trying to play with the IRS, the professional eye of the auditor will definitely catch you. IRS has provided several options to the taxpayers to save your hard earned money. You can invest in insurance plans and health insurances. This ways you can secure yourself as well as can save hefty amount of money. You should know your rights as a tax payer so that you can get information on what tax relief options you’re entitled to and how can you challenge the notice of audit sent by the IRS.