Sunday, April 26, 2009

Information on Avoiding an IRS Audit

The IRS is an entity that people fear. The last thing anyone wants to do is to raise red flags to the IRS that results in them being audited. There are however certain measures you can take to reduce the chance of being put through an audit. There is a minority of IRS audits that are conducted purely on random selection by a computer, but the majority are done as a consequence of incorrect information being submitted or circumstantial information that does alert the audit system to take a closer look.

Some issues that come up are simple mistakes such as when a divorced couple both claim the same defendants on their tax returns. Other more complicated issues may be a warning sign, such as a self-employed individual having higher outgoing expenses than incoming turnover. This would obviously be cause for investigation, as it would mean that a business is continually operating at a loss and would not be a viable concern.

If you make more than $100,000 per year then your chances of an IRS audit will increase. This is due to a past history of those in this income bracket manipulating the system to show their deductions as higher than they actually are in order to lower their taxes. Yet most people don’t want to limit their income to less than this if they don’t have to just to avoid an IRS audit.

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