Receiving an audit notice from the IRS can be a daunting experience for individuals and businesses alike and likely leave you wondering ‘why does the IRS audit people?’. Understanding the reasons behind these audits can demystify the process and help you navigate it more effectively. At Brown, Chism & Thompson in Broken Arrow, OK, we provide you with the knowledge and support necessary to handle any IRS audit with confidence. Here are the top five reasons why the IRS may choose to audit you, along with how our experienced team can assist you.
One of the most common audit triggers occurs when the income you report on your tax return doesn’t match the information that employers or financial institutions report to the IRS. The IRS cross-references your reported income with forms like W-2s and 1099s, and any mismatches can raise a red flag. This is just one reason why the IRS audits people.
How We Can Help: At Brown, Chism & Thompson, we can help you review your tax documents to ensure accuracy and identify any potential discrepancies before they become an issue. If you find yourself facing an audit due to such discrepancies, our team will represent you and help clarify your situation with the IRS.
Claiming a high percentage of deductions compared to your income can prompt the IRS to take a closer look. This is especially true for self-employed individuals or those with significant itemized deductions. The IRS has specific guidelines regarding what is considered “normal” for various professions and situations, and deviations can trigger an audit. Such deductions might partially explain why the IRS performs audits on certain individuals.
How We Can Help: Our professionals can guide you through the process of substantiating your deductions, ensuring that you have the necessary documentation to support your claims. Should an audit arise, we will work diligently to defend your deductions and demonstrate their validity.
Failing to report all sources of income, whether intentional or unintentional, can lead to an audit. The IRS receives information from various financial institutions and employers, and any unreported income can lead to significant penalties. This lack of income reporting is a frequent reason for the IRS to audit people.
How We Can Help: If you suspect you may have unreported income, our team can assist in conducting a thorough review of your financial records. We can help you amend your tax returns if necessary and represent you in discussions with the IRS to minimize any potential penalties.
While claiming business losses is a legitimate practice, doing so for several consecutive years can draw scrutiny from the IRS. The agency may question whether your business is a legitimate profit-seeking endeavor or if it is being used to offset other income. This scrutiny is another reason why the IRS might choose to audit individuals or businesses.
How We Can Help: Our experienced tax professionals can help you evaluate your business operations and ensure you are compliant with IRS guidelines. In the event of an audit, we will be prepared to demonstrate the legitimacy of your business activities and your intent to operate profitably.
Sometimes, audits occur simply due to random selection or algorithms used by the IRS to score returns based on various factors. While it may seem arbitrary, it’s essential to be prepared regardless of the reason behind the audit. Random selection is yet another reason why the IRS queries certain tax returns.
How We Can Help: At Brown, Chism & Thompson, we understand that the audit process can be overwhelming, especially when it feels random. Our dedicated team will stand by your side, guiding you through each step and ensuring that your rights are protected throughout the audit process.
An IRS audit can be a stressful experience. Therefore, understanding why audits occur and having the right support can make all the difference. We are here to help you navigate the complexities of an audit with professionalism and expertise. Whether you need assistance preparing for an audit or representation during the process, our knowledgeable team is ready to support you every step of the way. Contact us today to learn more about how we can help you achieve peace of mind when facing the IRS.
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