5 IRS Audit Triggers To Keep In Mind

July 24, 2020

The Internal Revenue Service issues audits for many reasons, most of which are easy to avoid. Take a moment to learn about some of the most common IRS audit reasons, and consider working with your Encino tax consultants to stay out of the audit zone in future tax seasons. 

Too Many Charitable Donations

If your list of charitable donations appears excessive, the IRS takes notice, especially if the deductions are thousands or tens of thousands of dollars. Never claim donations you didn’t make for charities that may or may not exist, and ensure they are relevant to your taxable income. For example, if you made $66,000 last year and are claiming $25,000 in charitable donations, you will be audited. 

Math Errors

An audit can occur simply because you entered numbers on your tax forms incorrectly. Perhaps you added or subtracted a few zeros accidentally, or inverted numbers. Double and triple-check your math to avoid audits, and consider hiring your Los Angeles accounting specialists to prepare your taxes for you. The CPAs ensure error-free work. 

Income You Forgot to Report

It’s difficult to forget about income under $600 since you receive 1099 miscellaneous income statements about them; however, mistakes can happen. Whether you intentionally or accidentally forgot to report some of your income, it appears as tax fraud to the IRS. Make certain you have all of your 1099s and report all income $600 and over to stay out of audit territory. 

Excessive Losses on Schedule C

If you are an independent contractor and therefore self-employed, you are allowed to write off business expenses such as office supplies, new laptops and other work devices, and even a portion of your rent and utilities if you mainly work from home. However, your Profit and Loss statement should not include personal losses, such as writing off your new racquetball equipment or jet ski. Leave personal expenses off of your statement to keep the IRS away. 

Many Large Cash Deposits

Making cash deposits of $10,000 or over on a frequent basis looks suspicious. The IRS will wonder where you obtained the money since such deposits can come from illegal dealings such as money laundering schemes. Your income should reflect the deposits you make throughout the year, not raise questions. 

Get professional tax prep help from Wallace & Associates, your accountant service in Los Angeles.