Last year the Internal Revenue Services (IRS) revealed that only 0.84% of all tax returns were audited. This is the lowest level in audits in over a decade.
But taxpayers should never assume that their return is audit-proof.
The IRS has not disclosed why some returns are selected for auditing while others pass through free and clear, but there are some common factors which may increase your chances of being selected for an audit.
You Made More Than One Million Dollars
The lowest percentage of tax returns audited were those who earned anywhere between $25,000 and $199,999. The highest percentage: those who earned over $10 million.
- Percentage of audited returns for those earning $1 million to $5 million: 8.42%
- Percentage of audited returns for those earning $5 million to $10 million: 19.44%
- Percentage of audited returns for earning over $10 million: 34.69%
The IRS has made it no secret that because of budget cuts they have been forced to target high income earners in an attempt to “work smarter”. Their reasoning: they need to look more closely at those with more money – and more money to hide – in order to get the best return on their audit investment.
You Took Substantial Charitable Deductions
Giving money to charities is not only great for society, it’s also a nice tax write-off. But if the donations you made over the past year were substantial when compared to your income, you may be receiving a phone call from the IRS.
If you are providing a charity with a non-cash donation which is valued at $500 or more, a Form 8283 must be filed. Make sure that you receive an appraisal from a qualified professional for all donated valuable property.
You Did Not Report All of Your Income
Each year, the company or companies you work for are required to send the IRS copies of all W-2 forms and 1099s you receive. If the income you report on your tax return doesn’t align with these forms, this can trigger an audit. If you earn income from multiple sources, make sure it is accurately reported on your 1099.
Contrary to what some may say, no return is 100% audit proof. If you have been selected for an IRS audit, contact the Scammahorn Law Firm today. Our accomplished tax attorneys have the experience in tax law necessary to handle the IRS and to protect your rights and assets.
To schedule for a confidential consultation, call (903) 595-1000.