You may think you have your bases covered when it comes to escaping the dreaded tax audit from the IRS. You may have extensive financial records detailed receipts and careful disclosure of anything you deem tax-worthy. But the nation’s tax collectors have a long history of looking for discrepancies omissions and suspicious activity to uncover tax evasion and fraud. Surprisingly the IRS has expanded its monitoring of activity in a realm you may have never considered pertinent social media.
Are You On the IRS Watch List?
The agency is now keeping an eye out for any online discussions about nonpayment or underpayment of taxes and even sales prices of goods on sites like eBay that may possibly not match up with what taxpayers report.
Companies like Amazon have already begun monitoring consumer online activities so this shift is not altogether surprising. Although public discord about the transparency of this monitoring is rampant the bottom line is that taxpayers now need to be aware that there are far more circumstances that can put them under scrutiny. Here are a few situations that are likely to attract more attention of the IRS.
According to several tax experts if you donate a car or a large quantity of clothing make sure that the deduction you take is reasonable and that you can document how you came to that amount.
Taxpayers who are in business for themselves or who work for someone who is are more likely to face more scrutiny and be under observance from the IRS.
If your businesses operates on a cash basis the IRS is watching for mismatches between what others file about you and what you file on your taxes. For example if you neglect to include a payment for some freelance work during the year and the payer reports it as a business expense you are likely to get some scrutiny. This would also be the case if you neglect to report gains from an investment account but the investment firm reports them.
According to the IRS taxpayers making $1 million or more are more than 12 times more likely than the rest of the population to be examined. In 2010 the IRS audited 3.8 percent of returns for those making $200000 or higher versus 12.5 percent of returns for those making $1 million or more.
Although you can become more aware of the possibilities for an audit there is no surefire way to prevent one. But experts agree that one practice to improve your odds is to be open about everything.
If you need assistance in determining your risks for an IRS audit or just need help walking through a tax preparation contact our office and we will assist you in securing a return that best benefits you.