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Friday, February 06, 2015

5 Tax Red Flags That Can Lead to an IRS Audit

Nobody wants to be audited by the IRS, but many taxpayers make simple mistakes that can lead to just that.

Many Americans will file their income tax return early before the April 15 deadline to receive their tax refund. Some IRS audits are randomly selected and based solely on a statistical formula, the IRS says, but other audits can happen when documents simply don't add up.

Here are five common red flags that could lead to an audit:

1. High income

"There’s more room for fudging higher income levels than lower income levels," Greg McBride, Bankrate.com chief financial analyst, said. "Higher incomes are also in a higher tax bracket so there’s a greater temptation to cheat.

2. Outsized deductions

Large deductions relative to one's income and national norms could also raise red flags.

"It may defy common sense if, for example, someone is claiming a ton of mortgage interest on a very modest salary. Something there doesn’t quite match up," McBride said.

Another example may be very large charitable deductions.

"A large number of charitable deductions on a modest income is definitely going to raise a red flag," McBride said.

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2 comments:

  1. And always remember they will spend 50 thousand dollars to collect 1 dollar.

    ReplyDelete
  2. Saber rattling by an agency crippled by budget cuts.

    ReplyDelete

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