Audit RouletteAre you willing to play “audit roulette” with your taxes? When people are willing to understate their income or overstate their expenses or deductions in order to lower their taxable income they are planning “audit roulette” in the hopes that they will not be audited. I recently read an article in Kiplinger magazine entitled “IRS Audited Flags: The Dirty Dozen” mentioning that the current audit rate for filers with less than $200,000 is 1.11%, and jumps to 3.93% for filers over $200,000 meaning the more you make, the more likely you are to be audited. The article continues with other actions that can produce red flags for the IRS such as failing to report all taxable income, taking large charitable deductions, claiming a home office deduction, claiming rental losses, deducting business meals and entertainment, claiming 100% business use of vehicle, writing off a loss for a hobby activity, running a “cash” business, failing to report a foreign bank account, engaging in currency transactions and taking higher than average deductions. While these are all points well taken, there are further points that must be considered such as different audits for different purposes that are ongoing projects at the IRS. The best way to avoid being audited is to have a complete and accurate set of books and to have your personal and/or business tax returns prepared competently. This is not a guarantee that you will not be audited. However, it will help you incase you are audited. If you receive any notices form the IRS or the Massachusetts Department of Revenue, you should respond as soon as possible, or contact your accountant. HTML Comment Box is loading comments...
Melanie Ross | 02/06/2012
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