The IRS might flag you for an audit if you do these things

On Behalf of | Jul 16, 2021 | IRS Tax Law

Not as many Texas residents receive audit notices as you might think, but the bad news is that this matters little if you’re a recipient. There are ways to prevent the flags that IRS tax law throws up.

Forgetting to declare income

Even if it’s just a small amount, remember that people and organizations paying you likely pass the information on to the IRS. When the tax authority notices that you aren’t claiming the income from a particular source, it could raise flags. You are even more likely to become a target if you make more than $200,000 a year.

Claiming unusual deductions and credits

Just because you can legally claim something doesn’t mean that you should. A good example is the gambling loss deduction. You might also raise suspicion if you claim the home office deduction.

Running a business can make you more vulnerable

A business comes with a wide variety of deductions. However, what happens when you claim deductions for something that the tax agency considers a hobby rather than a bona fide business? It may result in an audit.

Note that there is a three-year statute of limitations for the IRS to initiate an audit. Therefore, you don’t have to have an accountant go over your tax returns from a decade ago to prevent any surprises in the future. Concurrently, this three-year rule gives you a good window of time to revisit some mistakes and deductions that could make you a target.

If you do get on the wrong side of the IRS tax law, it could be a good idea to talk to an attorney about your situation. An attorney may help you develop a strategy for dealing with the agency.