Do you know the meaning of Forosophobia? It means fear of taxes and the IRS. You can imagine how much people fear to have been audited by IRS. This blog will help you avoid some common mistakes that can trigger an IRS audit if you are also among them.
What is an IRS audit?
In the United States of America, a tax audit examines a business or individual tax return by the Internal Revenue Service (IRS) or state tax authority. Fortunately, they don’t audit any random people without suspicion. Read the following write-up if you have trouble understanding how it works and what not to do to attract IRS attention.
Top IRS audit triggers
IRS pays attention to the smallest of matters. They are responsible for fighting tax fraud and other irregularities. Most people find it difficult to understand tax laws and why they make mistakes unknowingly. This blog will help them. Let’s discuss some of the things you must avoid.
- Unreported income
The main job of IRS officials is to find unreported income. According to the law of the land, one is liable to pay taxes on his income. You have unreported income means you have broken some of the laws and could be audited by the IRS. You can hire experts (whom include tax audit attorney) in this situation. They are more experienced than you are in these matters and can represent you in front of the governing bodies if needed.
- Claiming a loss
Having a loss in a business is fine until you have enough proof to substantiate it. If IRS finds that you have reported a false claim to save some of the tax money, they can look into your business details. For that reason, running a business with proper paperwork is necessary. Try to maintain your books fair to avoid any unwanted situations. Take some expert help if you need it.
- EITC or earned income tax credit
IRS thinks most of the EITC claims are false. Though there are some unintentional errors, IRS look into this matter very seriously. If you have claimed for EITC or earned income tax credit, you must have proper documents. To understand more, you can hire tax professionals (whom include tax attorney in Newport Beach).
- Crypto or Virtual Currency Income
Cryptocurrency is now the talk of the town, but many people don’t know that it is taxable. IRS sees cryptocurrency or any other virtual currency as property. When you profit from it by selling it, you are liable to pay tax on it. Keep it in mind before investing in Bitcoin or other virtual currencies.
- Deduction Beyond Imagination
For business owners, there are laws for a tax deduction in certain cases. Deduction of tax must be within the permissible limit. Once the limit is crossed, IRS can scrutinize your claim, ultimately looking into your account.
These are some of taxpayers' major and common mistakes that can trigger an IRS audit. Try avoiding those to be on the safe side. However, if IRS sends you an audit notice, try not to panic. Get help and advice from someone familiar with these laws which can guide you.
