Posts Tagged "tax audit"

Keep your audit fears in check

Posted on Jun 20, 2017

Getting audited by the IRS is no fun. However, your chances of being audited are probably lower than you think. A look at the latest IRS statistics for 2016 reveals some interesting and reassuring facts about the risk of an IRS audit. Audits are becoming less common. The number of individual tax returns the IRS audited fell to a 12-year low last year, to just above 1 million. Audits have been steeply declining over the last five years, which the IRS commissioner said was due in part to declining budgets and a smaller workforce. Audits target the rich. It’s a fact: IRS audits target the super-rich. The statistical chance of being audited increases dramatically for people of higher income levels. Missing data can get you audited. High income isn’t the only thing that gets you audited. Any missing data on your return can also trigger an audit. Standing out gets you audited. The IRS takes a close look at business expenses, charitable donations, and high-value itemized deductions. They have statistical data on what amounts are typical for various professions and income levels. If your return stands out from what is “normal,” it may be flagged for review by the agency’s computer system. More audits are done by mail. If you face an audit, most likely it will be done by mail. Only about one in four IRS audits are field audits conducted in person by an IRS agent. The most common issues, such as math errors or missing data, are done through mail correspondence. If your issues are more complicated, you may face a field audit – and you may owe more to the IRS. The average field audit recommended the individual pay an additional tax of nearly $19,000, while the average correspondence audit recommended a payment of less than $7,000. Most audits end up costing you. You can fight the tax law, but the tax law usually wins. Most people audited by the IRS end up owing additional tax. Only 11 percent of correspondence audits and 8 percent of field audits concluded with a “no change” finding in favor of the...

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IRS audit plans revealed

Posted on May 25, 2010

The IRS has announced 2010 audit plans, which include audits in the following three areas:  * A three-year random audit program started by the IRS in 2007 will now be continued indefinitely. These random audits of individual income tax returns are used by the IRS to collect noncompliance data for adjusting general audit formulas and updating tax gap estimates.  * Another audit target: tax returns claiming the homebuyer tax credit. The IRS expects to open 200,000 audits by the end of 2010 to address potential fraud in claiming this credit. The Service will also be watching the recapture of the credit via public databases of real estate sales. Generally, those who sell a home within three years of taking the tax credit must pay it back.  * According to IRS Commissioner Douglas Shulman, the Service is planning to focus significant audit resources on individuals with millions of dollars in assets or income, including the business entities controlled by these high-income...

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Business Alert: IRS to conduct employment audits

Posted on Mar 9, 2010

The IRS is launching a three-year auditing project that will examine about 6,000 U.S. companies for compliance with employment tax obligations. The project is the first of its kind in 25 years, and its primary objective is to collect data to identify areas of noncompliance across all industry sizes and sectors, including nonprofits and governmental entities. Among the issues the audits will look at: * Classification of workers as employees or independent contractors, including executives rehired as consultants, dual status employees, and employee leasing arrangements. * Fringe benefits, including expense reimbursement arrangements and noncash benefits. * Executive compensation and fringe benefits, executive retirement contracts, golden parachutes, and stock options. The project will target 2,000 employers each year, with the first audit letters scheduled to go out this month or...

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