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Fewer audits, best practices mean less tax hassle

On Behalf of | Apr 9, 2019 | Tax Audits

Georgia residents might be happy to know that their chances of being audited are fairly low. While it is still important to turn one’s taxes in on time, an individual has a 1 in 160 chance of being audited. In 2010, about 1 in 90 people were audited. A tighter budget led to a smaller IRS, which means fewer audits.

The likelihood of being audited increases when making more money. Earning more than $1 million means there is a 1 in 23 chance of being singled out by the IRS while those who make less than $200,000 are more unlikely to gain the attention of the IRS. Tax returns that typically catch the attention of the IRS are those that contain questionable or missing information and involve large sums of money.

Citizens can take steps to help ensure they will not be one of the unlucky few who are sent an audit notice. Self-employment income is one area where auditing often occurs. This is because deductions could be exaggerated while income is reduced. There are also problems when personal and business spending mix too closely. This might involve writing off research trips or deducting equipment related to a side hustle when one has another career and isn’t yet generating income from the additional venture.

Another way to avoid scrutiny is to track income and deductions carefully. This applies to more than just self-employed people. Accurate record-keeping is also important for independent contractors, those making charitable donations and people with rental property.

Receiving an audit notice from the IRS can be a confusing and frightening experience. This could be made worse when trying to deal with the agency directly because IRS examiners typically have more familiarity with the way the system works than taxpayers. If a tax dispute occurs, one may wish to consult a tax attorney who could negotiate with the IRS.