Monday, February 18, 2013

Are You an IRS Audit Target? - Part II

We previoustly posted Are You an IRS Audit Target? - Part I.  We continue this discuss herein.

Several approaches can improve the odds that you won’t be caught in an audit. Some are surprisingly simple. These include fact-checking names and Social Security numbers for you, your spouse and dependents and filling out accurate occupational descriptions for you and your spouse.
Other tips cited by the NAEA include accurately reporting“all the income that the IRS knows about,” as IRS computers will match all W-2s, 1099s and other tax documents for you with your Social Security number.
“When you receive a substantial part of your earnings in cash or without paperwork, that doesn’t mean you’re off the hook,” the group adds. “IRS computers look at certain aspects of your lifestyle and will tag you for audit if your visible income is much too low to match your ZIP code or family size.”
CCH cites several types of deductions that raise red flags because they aren’t allowable. These include trying to claim a loss on your home, deducting excessive moving expenses and trying to claim medical deductions for unnecessary cosmetic surgeries.
Yet nothing seems to draw scrutiny like the adoption credit. A staggering 69 % of such returns were audited last year, with the examination process extending four months on average.
Even if you're not in one of the above target groups, you're not necessarily off the hook. Some returns are randomly selected. But most "winners" of the audit lottery are identified by the tax agency's discriminant-function program.
Under that program, IRS has created a number of composite hypothetical taxpayers. The agency's computers compare your return with those of the hypothetical taxpayers. The further your return is from the statistical norms, the more the computer clicks. And, the more the computer clicks, the higher the probability your return will be kicked out for review.

The table below gives average itemized deductions for 2009 returns filed in 2010. If your deductions are above average, the IRS is more likely to notice you.

US taxpayers' average deductions
Adjusted gross income
Under $15,000$8,838$3,337$1,496$8,414
$250,000 and up25,22748,31718,48838,149

Regardless of the averages, deduct only the expenses you actually incurred. If you spent more than the average, claim it. Just be prepared to substantiate your numbers.

Are you Being Audited by the IRS?

Contact the Tax Lawyers at Marini & Associates, P.A.
for a FREE Tax Consultation at www.TaxAid.usor
or Toll Free at 888-8TaxAid (888 882-9243).


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