Tips to avoid an IRS audit in 2018

The Internal Revenue Service (IRS) audited an estimated 1.1 million tax returns in 2017. Those who are concerned about an audit likely have the following questions:

How will I know if I am getting audited? The IRS generally notifies taxpayers of an impending audit through a mailing.

How does the IRS select candidates for an audit? There are a couple of things that will increase a taxpayer’s risk of becoming the subject of an audit. Some examples include:

  • Questionable deductions. The IRS often flags tax deductions for a home office and gas mileage for work or business travel. If you took out this deduction previous tax years, make sure you have records to back up the claim. It is also important to note that the Tax Cuts and Jobs Act has impacted these deductions for future tax returns. In some cases, taxpayers will simply use the increased standardized deduction. However, those who choose to itemize their deductions need to carefully review the rules for the home office expenses deduction as they have changed.
  • Lots of 1099s. Contractors that receive more than a few 1099 forms from the IRS are at an increased risk of an audit. This is because the agency interprets a large number of 1099s as an opportunity for a taxpayer to fail to report all of their income. Report all income and keep records of expenses to ease the process if the IRS asks for additional information.
  • Income bracket. As always, taxpayers in a high-income bracket are at an increased risk of audit.

These are just three triggers that can increase the risk of an audit. Taxpayers can reduce the risk of an audit in some situations. The first trigger, for example, can be avoided by carefully following rules for claiming deductions.

Regardless of the reasoning behind the audit, those that find themselves the subject of scrutiny by the IRS are wise to contact an attorney to better ensure their interests are protected.

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