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5 Common Reasons for an IRS Tax Audit

If you make money, chances are you also pay personal income taxes. Although the phrase IRS tax audit often scares people, most taxpayers don’t have anything to worry about. If you’re not actively trying to pay less than you should be, an audit is really just a double check on the accuracy of your numbers. There are several reasons for an IRS tax audit of an income tax return. Knowing the 5 most common reasons for an IRS tax audit puts you ahead of the pack and, hopefully, on the path to avoid a time consuming and potentially costly tax audit.

Mathematical Errors

Everyone is human, and everyone makes mistakes. However, your tax return isn’t the place you want to be making mathematical mistakes. Such mistakes can result in costly interest expense, penalties, and in some circumstances an audit.  In the long run, it pays to always double and triple check your work, use reliable tax software, or get  help with your taxes through a reliable tax professional.

Underreporting Income

No matter whether you’re filing a Form W-2, Wage and Income Tax Statement, or Form 1099, Miscellaneous Income, it’s important that you claim all the income you’ve made throughout the year. It’s often tempting to ignore a payment and hope no one notices it, but it can become a huge headache if the IRS audits you and finds it. If a third party claims that they paid you, and you haven’t included that income on your income tax return, the government will know about the discrepancy and you might find yourself face-to-face with an IRS Revenue Agent as well as extra taxes, interest and penalties.

Too Many Business Expenses

If you buy needed inventory or supplies for your work or business, those items are deductible on your tax return.  Inventory or supply expenses disproportionately large for your industry, company size and/or geographic location raise huge red flags within the IRS and dramatically increase the odds of an audit.

Using Round Numbers

While it might make your calculating easier, do not round up to even 100’s. Instead, be as precise as you can with your numbers, and if you have to round up or down, be careful how you do it and make sure the numbers are accurate. Filing your taxes with only round numbers will be a tip off to the IRS that something’s amiss and possibly lead to an audit.

Deducting a Home Office

Unless you have a dedicated space in your home used exclusively for your business, you might not want to bother attempting to claim a home office as a deduction. Furthermore, if you’re going to take the deduction, you’ll want to be as accurate as possible in reporting your expenses and the measurement of the space dedicated to business use of your home.

Are You the Subject of an IRS Tax Audit?

While the run of the mill person is unlikely to be the subject of an IRS tax audit, it’s easier to just follow the rules the first time around. However, if you are ever worried about your taxes, or you happen to be one of the people who gets audited this year, it’s best that you have experienced tax law attorneys on your side.

Do the reasons for an IRS audit strike a chord with you? Do any of these triggers appear on your tax return?  If they do, or if you’re already being audited, contact us today.  Our New York tax lawyers have more than 30 years experience helping taxpayers with tax issues. Let a New York tax attorney at Mackay, Caswell & Callahan, P.C. help you through the process. Complete our online contact form or call us at 844-MCC-4TAX (622-4829).  We have offices in Albany, New York City, Rochester, Syracuse, Utica and Watertown, so whether it’s a Manhattan tax attorney or an Albany tax attorney you need, we stand ready to help!