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How Worried Should You Be About Getting Audited by the IRS?

Posted on in Tax Services

South Texas tax consultant

The usual tax season will be wrapping up soon, but that does not mean that the IRS will not be bothering you. Depending on how your returns look now—and even in prior years—you might find yourself dealing with an IRS tax audit anytime this year. Especially these days with so many people preparing their taxes on their own through apps and other software services, it can be easy to think that you might have made some mistakes on your returns that could call attention to them, raising numerous red flags in the eyes of IRS agents. Here is what you need to know about these audits and how you can avoid them.

What to Know About Tax Audits and How to Avoid Them

When the IRS audits your taxes, they are reviewing your tax returns and financial records to verify their accuracy. They want to check to see if you somehow did not pay the full amount of taxes due to them or if you failed to provide all the necessary and honest information to give them an accurate return. Some important facts to know about the auditing process include:

  • While many people are so very fearful of IRS tax audits, the truth is that they are actually quite uncommon for the average taxpayer. In fact, the 2019 returns had only 0.4 percent of the individual tax return records audited and due to the financial complications of the pandemic last year, many are expecting an even lower percentage of audits for 2020.

  • The IRS does have statutes of limitations with regards to audits:

    • The IRS usually only can audit returns that are up to three years from their initial filing.

    • If, however, you neglected to report 25 percent or more of your income, the IRS can still audit you up to six years after the fact. That means it is critically important that you report all of your income to the IRS, including W-2s and 1099s.

  • The three most important things to keep in mind at all times while completing your returns or discussing them with an agent to ensure you do not get audited are:

    • Be honest, truthful, and accurate with the information you provide. Be able to back information up with documented evidence (receipts, forms) and double-check your work for accuracy.

    • Provide complete information. In particular, do not forget certain income, such as investment income or cryptocurrency income. 

    • Compare your taxes year over year. If your taxes the past few years are vastly different without many changes in your life, the IRS might wonder why there was such a significant difference in returns. This comparison will also help you see if you forgot to report anything.

  • Be careful about business deductions and losses. Taking the home office deduction is trickier than you might think and large business expenses or losses can be easily called into question.

Contact Our South Texas Tax Consultants

If you are facing a tax audit and need IRS audit help from a Texas Enrolled Tax Agent or if you simply have some questions about tax help in general now during tax season, reach out to Ed Villanueva & Associates, Inc. at 210-382-9015 for a free consultation. E. Villanueva has more than 35 years of experience working as a consultant to help people like you deal with their taxes. As a San Antonio Enrolled Tax Agent and a former IRS agent, he has the background, skills, and knowledge about the IRS and its tax codes to help you with accurate tax completion and strong IRS audit defense, among many other services. He and his team will guide you through your taxes with care and professionalism.

 

Sources:

https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits

https://money.usnews.com/money/personal-finance/slideshows/9-red-flags-that-could-trigger-a-tax-audit

https://www.kiplinger.com/taxes/tax-returns/602068/irs-audit-red-flags

https://www.thebalance.com/top-audit-triggers-that-catch-irs-attention-4153034

 

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