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What kind of taxpayer the IRS likes to audit

On Behalf of | Sep 8, 2016 | Tax Audits

Georgia residents have less risk of being audited by the Internal Revenue Service than they have had in decades. That’s because the IRS began auditing fewer returns after the IRS Restructuring and Reform Act of 1998 forced the agency to pay greater attention to taxpayer rights than collection activities. Budget cuts have also resulted in fewer IRS audits.

With less ability to carefully examine every return, the IRS now focuses more of its attention on high earning taxpayers and specific information on tax returns that brings up red flags. The more income people earn, the more likely they are to be audited by the IRS. Reports of things like home-based businesses, non-cash charitable contributions and large deductions for business meals may get a closer look from the IRS. People who file simple tax returns that do not stand out from the crowd are usually safe from IRS audits.

While the IRS tends to focus most of its attention on rich taxpayers, the agency is also interested in carefully examining tax returns from people who are claiming the earned income tax credit. Because this tax break can be complicated, many people make mistakes when they claim it. People may be accused of falsifying information on their tax return in order to increase the refund that they receive after claiming the earned income tax credit.

A person who has been targeted for an audit by the IRS will not always end up owing any money to the IRS. A taxpayer who can provide documentation for all of the deductions claimed may get through an audit without being handed a tax bill at the end of it. An attorney can be helpful in preparing a client for a tax audit by collecting all appropriate documents and financial information.