Wealthy Taxpayers Are More Likely to be Audited and Should Know How to Avoid Audit Red Flags

According to a recent article in the Wall Street Journal, a push by the IRS to be more aggressive with wealthy taxpayers means that it’s critical to know the common tax audit red flags.

The IRS has been strongly disputing a report this week from the Transactional Records Access Clearinghouse that says audits of the wealthy Americans have significantly dropped off.

Taxpayers who make more than $10 million a year or more have nearly a 10% chance of being audited

According to Agency spokesman Terry Lemons , “if you’re a millionaire, you’re a lot more likely to hear from the IRS than taxpayers in any other income bracket.”

While no one can say for sure which tax return will trigger an IRS audit, wealthier Americans under greater scrutiny from the IRS should be aware of common adudit red flags.

With the White House looking to bolster IRS enforcement, one of the best things you can do to reduce your chances of an IRS audit, is to file and accurate tax return.

The number ONE red flag in triggering a tax audit is claiming false business expenses.

Monies from your expenses’ payments must be used for legitimate business-related activities. However, many people end up in tax trouble when they used these monies for personal purposes and falsely characterize them as legitimate business expenses. This can be seen as a failure to report additional income on your tax return.

And keep in mind the following things that could invite IRS scrutiny:

  • Numerous gifts to charity
  • Reported income that doesn’t match numbers shown by employers and brokers on 1099 and W2 forms are items that invite scrutiny
  • Schedule C, for small business owners
  • Big write-offs for hobbies like owning horses or Picassos

** If you are in trouble with the IRS and need tax help, contact our specialized staff of attorneys, CPAs, EAs and tax professionals. Visit the Tax Resolution Services web site  for a free tax relief consultation or call us at 866-IRS-PROBLEMS.

More Tax Help, IRS News and Tax Relief Tips:

  1. Why the IRS Picks on Small Businesses and How to Avoid Triggering an Audit
  2. IRS Asserts Position on Tax Protesters: Sanctions Imposed for Advancing and Maintaining a Frivolous Argument
  3. Cracking Down on Businesses with Payroll Taxes Problems: New Economic Stimulus Plan Calls for Heightened IRS Enforcement
  4. Insight into Most Serious Tax Problems from from National Taxpayer Advocate
  5. Talk to the Tax Expert – On the Mind Your Bizness Show

Tags: , , , , , , , , , , , , , , , ,

Bookmark and Share

Leave a Reply