The overall audit rate is extremely low, less than 1% of all tax returns are examined in a year. However, these nine items are more likely to increase the risk of being examined. IRS computer programs continuously review tax returns. If there are any discrepancies when the computer matches a return with other data that it has on file, a person will mark and analyze that return.
They're also likely to tell you if the tax forms submitted don't match your reported income, which will generate an automatic notification, said Preeti Shah, certified financial planner and public accountant at Enlight Financial in Hamilton, New Jersey. Tax Shark's tax professionals have decades of experience in representing and resolving tax audits. However, if your amended tax return shows an increase in taxes and if you file the amended return within 60 days before the three-year law takes effect, the IRS only has 60 days after receiving the amended return to make an evaluation. Parking and tolls are always deductible regardless of the method you use, and other modes of business travel, such as plane tickets, public transportation and taxis, are deductible based on their actual cost.
If your revenues suddenly skyrocket or plummet by a suspiciously large amount compared to the previous tax year, the IRS is more likely to examine your records. If your tax return is selected for auditing, being able to easily find your records will speed up the appeal process. If the 1099 forms don't match your records, or you're owed a form but don't have one, contact the payer to have a corrected form issued before you file your tax return. This is the basic collection law, but in some cases those 10 years can essentially be renewed, and there are some cases where the IRS seems to have a memory like an elephant.
If you find an IRS error, write a letter that clearly explains the error and then attach documentation showing that what you submitted was correct. The notice will indicate that you have not reported sufficient income and will also indicate a proposal to recalculate your taxes based on your information. To learn more about how to make mistakes on tax returns in South Carolina, a free case evaluation is your next best step. If you don't keep business expenses separate from your personal finances, not only will you hinder the tax preparation process, but you'll also greatly increase the risk of being audited.
The IRS may contact you approximately two and a half years after you file your application and ask you to sign a form to extend the statute of limitations. However, you may be able to limit the scope of the extension to certain tax issues or limit the time (for example, an additional year). It is believed that the IRS can track information such as medical records, credit card transactions and other electronic information, and that it uses this additional information to find tax fraudsters. If you filed your taxes and forgot to include a W-2 form, you should immediately file an amended return and include the W-2 form.