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Five Major Reasons Taxpayers Get Audited

February 03, 2012 | Comments: 0 | Views: 60

1. Forgetting to Report All Your Income

The IRS get a copy of ALL your 1099's and W2s, and when that income is not reported on your tax return, the IRS computer notifies an IRS human who usually sends a 2000-PC Notice, which is a more like a paper audit. All sorts of red flags go up when the 1099's and or W2s don't match the tax return that you file.

2. Claiming the Home Office Deduction

The IRS appears to be drawn to any return which takes advantage of a legal tax loophole in a big way. And claiming the Home Office Deduction can reduce your tax liability greatly.

The Home Office Deduction allows you to take a percentage of your rent, mortgage interest, home owners insurance, home improvements that pertain to the home office, real estate taxes, utilities, and any other expenses which are generated due to the home based business.

The best way to protect yourself, should the IRS decide to audit you, is to keep exact records and documentation of all expenses.

3. When Your Average Deductions are Higher Than the National Average

Many people wonder, why the IRS computer might select them as opposed to any other taxpayer. In most cases, the IRS computer will notify the IRS Human when a tax return is outside of the National Average, for other taxpayers in that same tax bracket, or same filing category. (No one except the IRS Computer Programmers know exactly which formula is used to select out possible cheaters) However, we do know one thing for sure. If a tax return does NOT fit into the parameters of the National Averages, there is a higher chance of an audit.

4. Forgetting to Report a Foreign Bank Account

The is a lot of speculation about if the IRS really has access to database of US taxpayers with foreign bank accounts. I believe that they do. And I also believe that soon, they will start to hand out prison sentences to people who have deliberated failed to come forward and admit to having foreign accounts.

The voluntary compliance program to continue until they have a documented procedure for how to handle the thousands of Americans who may have foreign bank accounts, which they have not told the IRS about. The IRS has collected over $4 billion in taxes from the voluntary program to disclosed foreign accounts. The chances of there being double that amount still outstanding, is great.

5. Earned Income Credit Cheaters

Single moms who have children with birthdays too close together and have filed for the (EIC) Earned Income Credit has our final vote for being of the top reasons the IRS audits a tax return.

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Source: EzineArticles
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