TOP 5 WARNING SIGNS THAT COULD LEAD YOU TO YOUR FIRST TAX AUDIT

Going undercover in order to avoid getting a letter or a tax audit from the IRS might be a silly move to take, especially after tax deductions and miscellaneous tax-dodging ways that helped trigger a warm welcome from the IRS. So, if you plan on faking your income, then the IRS might be at your back at all times in order to get all the information. Also, if you are unsure of your investments or business transactions, and wish to have an insight into your future tax consequences, then you could always demand a tax opinion letter from a tax professional for legitimacy, insight and input regarding your deal. A tax opinion letter will in turn help to disclose the possibilities and circumstances that could trigger a legal penalties or a detailed tax audit from the IRS. Mentioned below are 5 potential warning signs that have been flagged by the IRS as potential tax audit triggers.

1)DRASTIC CHANGE IN INCOME

So, what exactly happened over the year? The IRS holds the right to question your income status by reviewing the data through a tax audit report. Frauds tend to under-report their income in order to receive potential tax deductions.

2)SELF-EMPLOYED

While your business expenses might not make any sense for the IRS due to the fact that you haven’t been receiving the kind of income that could fund your claims, you could receive a potential letter demanding an authentic tax audit report in the mail. Try to be prepared by keeping all the receipts regarding your business expenditures so that you may turn in potentially.

3)DO YOU REALLY WORK FROM HOME?

If you intend on establishing a home office for work, make sure you qualify the tax deductions by proving to the IRS that you actually work in your den instead of being pretentious about it. You could be filed for a tax audit if your claims don’t justify IRS’s concerns and claims or your ‘work from home office’ routine isn’t authentic.

4)CLAIMING TO BE BUSINES-SAVVY WITH A HOBBY

Until and unless you don’t intend on earning from your potential hobby, you can’t enlist its overhead bill as your business expenses and expect the IRS to stay silent about it.

5)CLAIMS OF EXPENSES THROUGH FRAUDULENT BUSINESS EVENTS

Also, if you are demanding tax deductions for spending a lot on corporate parties or business meals without any proof of receipt or authenticity, the IRS holds the right to check whether you spent the amount as potential business expenditures or if you didn’t spend any of it at all and had a friend or relative to foot the bill.

There are a lot of people in this world of deceit, who might spam you and demand your information with scams and framed government emails. While you’re on the lookout, remember that the IRS always sends a formal letter to you whenever they request secretive information. There are plenty of scammers with bots out there, which demands extra vigilance from you.