IRS AUDITS- COMMON TAX RETURN MISTAKES

One of many taxpayers’ biggest fears is one day potentially having the IRS audit your tax return.  While you can never completely eliminate your chances of being audited, there are steps that you can take to reduce the possibility.  

 

Let’s take a look at some of the most common factors that result in an IRS audit. 

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WHAT IS AN IRS AUDIT? 

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An audit is a review of your financial information used to file your tax return, ensuring that the appropriate amount of tax was paid based on rules and regulations. 

 

HOW IS AN IRS AUDIT TYPICALLY CONDUCTED? 

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An IRS audit is generally conducted one of two ways.  One, through mail correspondence or secondly, via a face to face interview.  The type of audit will normally be based on the complexity of the audit. 

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An audit can occur due to alleged errors found in your return or as the result of a random sampling of all taxpayers’ returns, among other reasons. 

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It is important to note that IRS audits are initiated via the mail.  The IRS will not advise you of an audit via the telephone. 

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WHAT ARE SOME COMMON MISTAKES THAT MAY TRIGGER AN AUDIT? 

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Computational and Data Entry Errors 

 

Some of the most common errors on tax returns are math mistakes and data entry mistakes.  This can include anything from transposing a number from your W-2 to inadvertently misspelling your name or entering the incorrect social security number. 

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Incorrect Filing Status 

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Using the wrong filing status n your tax return can be another red flag in the eyes of the Internal Revenue Service.   

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For example, married taxpayers cannot use the head of household or single filing status.  If you have questions about the most appropriate filing status for your circumstance, please consider speaking with a tax advisor. 

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Missing Income 

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We typically begin receiving our financial documents in January of each year.  If you happen to file your tax return prior to receiving all of your income documentation or you receive updated or corrected information that impacts your tax return, you may receive a notice from the IRS asking you to reconcile your information. 

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Claiming Too Many Expenses or Deductions 

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The IRS has algorithms which calculate the amount of expenses or deductions that might reasonably be deducted for a certain income level.  If your tax return falls outside o these parameters, you may find yourself the subject of an audit by the IRS. 

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Claiming the Home Office Deduction 

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The home office deduction is a hot button issue for many taxpayers, given its increased susceptibility to be claimed fraudulently.  If you have a home office, be sure to track the square footage and related office expenses.  That way you will be ready should you be questioned by the IRS. 

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BUSINESS AUDITS 

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Business tax returns can sometimes find themselves on the receiving end of an IRS notice for audit.  Some of the most common reasons for your business being subject to an audit include: 

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• Improper classification of personal expenses as business expenses 

• Mistakes related to sales and use tax filings 

• Reporting losses in every year for your business 

• Improper filing of employment taxes 

• Among others 

 

Receiving an IRS notice can be a scary proposition for anyone.  Use these tips to help ensure your tax return is in order and you stay in the good graces of the IRS. 

 

If you have any questions about the Internal Revenue Service audits or you would like to learn more about our services, please feel free to contact us for more information.

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