Are you one of those taxpayers worried about being audited? The fear may be overblown \u2013 according to Internal Revenue Service data, just 1.6 million taxpayers were audited in 2011. The agency reviewed about 1% of returns sent in by taxpayers making less than $200,000, and no more than 12% of millionaires had their returns scrutinized.<\/p>\n
<\/strong><\/p>\n Still, no one likes extra stress courtesy of the IRS. Self-employed individuals seem to be magnets for audits \u2013 in fact, IRS data indicates that people who work for themselves and earn from $100,000-$200,000 yearly are five times more likely to get a second look from the agency than the typical employee.<\/p>\n <\/strong><\/p>\n Let\u2019s look at some red flags that might get you extra IRS scrutiny. (We\u2019ll end on a positive note \u2013 you or someone you know might be eligible for an unexpected federal tax refund from 2008.)<\/p>\n <\/strong><\/p>\n A Schedule C that hints at some odd bookkeeping.<\/strong> Schedule Cs get a close look annually as the IRS seeks to remedy the tax gap (the difference between federal taxes owed and federal taxes paid). As Schedule Cs are often filled out by solopreneurs and small business owners themselves, the chances increase for claiming substantial deductions that may be hard to substantiate.<\/p>\n Taxable income of $1 million or more.<\/strong> Millionaires work with accountants for a reason \u2013 generally speaking, returns prepared by tax professionals raise far fewer red flags than DIY ones. If you will make around $1 million this year, look back at the first paragraph of this article and consider whether or not it might be wise to defer some potentially taxable income into 2013.<\/p>\n Bad math.<\/strong> Calculators are readily available and they can be as crucial as software when it comes to filing your federal return. The IRS does spot mediocre mathematics in returns. It has even recalculated taxes to save people money in years when special tax credits were available, such as the Making Work Pay credit. However, it also finds unreported and underreported taxable income through the same scrutiny. In fact, the IRS found 4.2 million math errors last year on tax returns for 2010.<\/p>\n Huge deductions.<\/strong> Is your money-losing small business venture truthfully just a hobby? Did you really donate $4,000 worth of office supplies to a charity, and do you have the receipts to back that up? The IRS routinely checks returns for deductions that seem outlandish.<\/p>\n Living large. <\/strong>Does the IRS peruse social media? Yes it does, just as many people do. The IRS has done good detective work for years; its investigators know to check out DMV and employment records to get a better picture of an errant taxpayer. Today, photos and posts on Facebook and MySpace and Twitter can telegraph potentially valuable nuggets of information, particularly about young taxpayers who have come into wealth that their returns don\u2019t seem to show.<\/p>\n If you\u2019re reading this, you\u2019re paying more attention than many others. <\/strong>That claim really isn\u2019t so grandiose \u2013 a staggering number of Americans pay scant attention to their federal taxes. According to the 2012 Taxes and Savings Survey from Capital One Bank, 11% of American taxpayers choose to file at the last minute. For that matter, about 5% of Americans (that\u2019s 7 million people) don\u2019t file federal returns at all \u2013 and in some cases, it isn\u2019t just because they don\u2019t earn enough taxable income.<\/p>\n","protected":false},"excerpt":{"rendered":" Are you one of those taxpayers worried about being audited? The fear may be overblown \u2013 according to Internal Revenue Service data, just 1.6 million taxpayers were audited in 2011. The agency reviewed about 1% of returns sent in by […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":["post-1793","post","type-post","status-publish","format-standard","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1793","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/comments?post=1793"}],"version-history":[{"count":0,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1793\/revisions"}],"wp:attachment":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/media?parent=1793"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/categories?post=1793"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/tags?post=1793"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}