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Red flags that trigger IRS audits

On Behalf of | Dec 28, 2016 | Tax Audits

Most Georgia residents who will be filing their 2016 federal income tax returns will not be audited. In fact, the Internal Revenue Service only audits around 1 percent of the tax returns that it receives. Despite the low chances of an IRS audit, audits are still a concern for some people, and it is important to be aware of the red flags that the IRS looks for.

The IRS is more likely to audit the tax returns of people who report very low or very high incomes. The high rate of fraud that is associated with the Earned Income Tax Credit causes the IRS to question tax returns that claim the EITC but report very little income. At the same time, tax returns that report more than $200,000 in annual income are three times more likely to be audited than tax returns showing between $100,000 and $199,9999 in annual income.

Besides income, other tax return items that get the attention of the IRS are unusually high deductions, deductions that don’t make sense and consistent reports of business losses. The IRS is also more likely to audit a paper return than a return filed with online software because paper returns are much more likely to contain errors.

Though many IRS audits can be resolved through the mail, some audits result in a tax dispute. A tax law attorney may be able to represent a person who has been accused of defrauding the IRS or failing to make tax payments to the IRS. An attorney may help the taxpayer to show evidence that proves that the tax return was correct or not intentionally fraudulent.