Common Tax Audit Triggers

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Tax season is almost here once again. It's time to prepare and fill out those tax forms carefully. Fearing a possible tax audit also heightens around during this time. But there are many ways that taxpayers may be able to avoid this. An easy means is by knowing the common things that will trigger the IRS to perform a tax audit on people that they think may be hiding something.

Taxpayers should know that the IRS basically performs tax audits as a means to try and close out the "tax gap" for the year. This gap is the difference between what the IRS expects to collect and what they actually collect during the tax year. And there are certain triggers that will invoke the IRS people to conduct a tax audit on certain tax payers. Here are some of them:

Citing Too Many Losses

Losses in a business may likely be used as a means to reduce taxes paid. Some taxpayers may file a Schedule C in order to consider such losses as liable for reduced tax payments. Although filing a Schedule C does not automatically lead to an IRS audit, listing too many losses may just send warning bells to the IRS people to perform a tax audit to make sure.

High Charitable Deductions

Helping a charitable organization may be considered as a possible tax deduction on a personal income tax return. On average, tax payers usually donate around 3 percent of their income to charity. Anything higher than that can sometimes trigger a tax audit. But if you really have made a sizable donation this tax year, make sure that you have the proper documentations to prove the fact that you did.

Not Filing Other Income

Some taxpayers may think that they can get away with under reporting their income in order to pay for lesser taxes. They usually fail to report other income that they may have earned from means other than their main jobs. The IRS usually is looking closely into this by taking a look at their previous Other Income or Form 1099 records and matches it up with your current one. Any inaccuracies that they may find, by either failing to file a Form 1099 or any unreported income, may trigger a possible tax audit.

Making Too Many Obvious Estimates

Tax payers should bear in mind that the IRS considers a tax filing as an actual report of income and items related to it. The IRS does not consider them as mere approximations of income and earnings. If they find any obvious or too many estimates on the income tax return, they may ask questions and possibly request for a tax audit.