Just to help in what I believe may be the cause of you received an IRS Audit Notification, although changes in your income or use of new reporting forms, such as 5471 or 8938, may also trigger an audit.
- Marking any one of Boxes 7a , 7b and/or 8 of Schedule B without providing information on the asset(s);
- Indicating on the Tax Return that you live, work or travel overseas and not have some marking on Schedule B, Part III;
- Filing Amended or Delinquent Tax Returns with an indication of your living, working or traveling overseas;
- Tippor; a person who writes or communicates with the IRS that you may be not reporting income, taking false deductions, hiding assets. These Tippors can be anyone including, Ex-Spouse, Ex-Mother-In-Law, Ex-Business Partner, Jealous Neighbor, Colleague at the Office, Your Competitor. If the tip turns out to be rewarding for the IRS, the Tipper will received an award as well of 15 to 30 percent of the tax collected. So if you and your neighbor both have similar jobs, but you have a nicer car in the drive, taken nicer vacations, better dressed; then look out. If your Ex learns that you have a new and younger Spouse or children from your new marriage; look out.
- Preparing your tax return with numbers that always end in zero or zeroes is not recommended. Having income or expense amounts that stay the same from one year to the next year; such as insurance expenses, rental expenses, travel, meals may attract the attention of the IRS.
- Claiming an Office In Home deduction is always an attraction to the IRS because so many taxpayers have and continue to abuse this deduction. If you have a bona-fide Office In Home, then be sure to claim the benefits, but be sure you comply with the law, its limitations, and, remember, you bear the burden of proof on this deduction. Also, the IRS may expand their audit beyond the Office In Home deduction, which is normal, to most, if not all, of your business expenses, such as Schedule C. to assess not only income tax but also Self Employment taxation…double benefit for the IRS and double loss for the taxpayer.
- Failure to report money earned over the tax year through your own forgetfulness or purposely intentionally, will bring an audit since the IRS will have the payor’s report of income to you on Federal Form 1099-MISC. Even if you really did forget, the IRS will hold this non-reporting as “Willful” tax evasion.
- Tax deductions that don’t fit the main stream may attract the IRS, such as lap dancing theory for job stress or race driving lessons to ensure timely arrival at a work location.
- Large charitable contribution deductions will definitely attract the IRS examination Notice Letter even if you are consistently a large giver of money to charities of your choice, this unfortunately will attract an audit. So be prepared to substantiate the contributions of cash or property and get a certified appraiser for any gives over $5,000.