Are you a high-income earner and earning more than a million dollars? If you answered “Yes” without laughing then you may want to get ready for an audit.
As the lawmakers are seeking ways of increasing revenue, auditing millionaires and big companies seems like a simple fix to find areas where people may have cheated the system.
The Internal Revenue Service has shown a recent trend of auditing people who make more than $1 million a year. The agency audited 12.5% of such taxpayers in fiscal 2011, up from 8% in 2010 and 6% in 2009.
In 2011, the IRS audited nearly 1.6 million of 141 million returns.
All audits can be a major time commitment and costly, but “Only about a quarter of audits involve face-to-face meetings with the IRS officials,” according to an ABC News article. “Most communication for audits is through letters. More than eight in ten individuals audited ended up paying additional taxes in 2010, the most recent year with available data.”
We are here to help you reduce your chances of an audit.
- Make sure you report everything. No matter how small you think an item maybe, it is imperative that you report all income and tax related expenses.
- Don’t be claim more than you are entitled to claim.
- Document all expenses—you can utilize bank statements, receipts, or cancelled checks. You just have to prove to the IRS that the expenses that you are claiming were actually made by you during that tax year.
- Choose your preparer carefully…ummm…excuse me---I think I know a few. If your prepare makes big promises then you need to run to your nearest Liberty Tax® office!
Please stop by one of our offices and we can help you get prepared to avoid an audit and we will still be around if you are audited.
Disclaimer: Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.