While it’s unpleasant thinking about an IRS audit, it’s important for taxpayers to understand what activities can potentially trigger an IRS audit and when they need to consult a tax accountant in Dallas for assistance. Here are some of the most common tax situations that increase your chances of being audited.
1. Filing a Tax Return with Errors
When you file your tax return, it’s imperative to double-check your math. Even seemingly small mistakes, like incorrectly adding numbers or accidentally dropping a digit, can draw attention from the IRS.
To ensure your tax return is mathematically correct, have a qualified tax accountant in Dallas prepare your return.
2. Reporting Income That’s Suspiciously Low or High
If your tax return reports income that seems inappropriately high or low, the IRS may give your return a closer look. The IRS has an idea of the income, expenses, and deductions for individuals or businesses in specific industries. Should your return have figures that fall outside of this range, the IRS might decide to investigate.
3. Having Self-Employment Income
Individuals who work as independent contractors or sole proprietors are eligible for a host of deductions, such as a home office deduction and mileage deduction. However, it’s essential for taxpayers with self-employment income to be honest about their expenses.
The IRS may choose to investigate deductions that seem higher than average. Or, if they feel your income doesn’t align with your expenses, they may think you’re underreporting your income.
4. Running a Business That Handles a Lot of Cash
Some businesses, like car washes, barbershops, salons, driving services, and restaurants are more likely to receive cash payments from their customers. This makes it easy for the business to underreport its income.
The IRS is more likely to audit a return for a cash-based business. They may compare the business’s income with the owner’s reported income to make sure they align.
5. Taking Excessive Deductions for Charitable Contributions
When you donate money or items to charity, make sure to get a receipt to substantiate your donation. If you donate an item, make sure you have documents that support the item’s value. Don’t report contributions to organizations or individuals who aren’t officially registered as charities.
When to Call a Tax Accountant in Dallas
Once you receive a notification that you’re being audited, it’s usually best to contact a tax accountant in Dallas. Audits are time-consuming, taking time away from your personal and business responsibilities.
An accountant knows what documents are required to substantiate complex deductions and credits, and they have a clear comprehension of the tax code. Your accountant may also represent you during the audit; they can examine any tax assessments from the IRS to make sure the information and calculations are accurate.
Need expert assistance with your taxes? Contact us today to set up an appointment!
