Whether you complete tax returns in a timely manner, submitting them to the Internal Revenue Service (IRS) before the April 15 deadline or file for an extension - turning them in by mid-October, there are a few red flags to help avoid an audit. Typically the IRS will only go back three to five years for an audit but if discrepancies or reason is given for a more thorough investigation, the timeline may be extended.
No one, personal or business, wants to receive a letter stating they have been selected for an audit by the IRS. Even those who do everything “by the book,” like a majority of Americans, can feel a bit uneasy if notified of being subject to one of the four types of IRS audits and knowing every penny needs to be accounted for in order to avoid any potential penalties or fees.
Unreimbursed Business Expenses
Travel, automobile use, meals, and professional fees are all typical business expenses that taxpayers may attempt to deduct from their returns. Understanding what expenses you can write off can help to reduce an individual’s tax liability but if you have already been reimbursed by the employer then these are null and void. Keep a close watch on these as you complete a return to help avoid any audit because of a miscalculation.
The rise of digital currency, from PayPal and Venmo accounts to Bitcoin and others has led to an increased interest from the IRS. Ensure you report all income, regardless of how it is paid/earned, to stay current with your tax filings.
Failure to Report Taxable Income
In similar fashion, there are some individuals who do not report all of their earnings and taxable income. Cash transactions are especially hard to keep a paper trail but you’ll need to ensure that all monies are reported on the return to stay in compliance.
Business Use of Vehicle
Depending on your work, business use of a vehicle can be a deduction to help lower an individual’s tax liability. However, if you are claiming 100-percent use, then expect to answer a few more questions about the likelihood of such an event occurring as it is extremely rare.
Foreign Bank Account(s)
Having access to a foreign bank account is a question all its own and while a majority of those completing a return do not, if you do then expect the return to draw a little more attention. It may not necessarily result in an immediate audit but a failure to report such involvement can draw significant repercussions.
If you fear a return has been mistakenly submitted or become aware that you are soon to be under audit, then let the tax and financial experts in Denver
at Bloch Rothman and Associates assist you or your business today. In addition, they can also take care of multiple other issues dealing with paying or owing back taxes, required audits from other entities besides the IRS, or any other personal or corporate wealth management issues. Along with providing a quality tax service, our group can also complete tax returns or answer any other factors associated with financial issues or concerns you may have. Serving in Denver and all of the surrounding areas for 35 years, our firm has an extensive history in helping clients with any and all of their tax issues or dealings with the Internal Revenue Service. If you have questions about your personal, business, estate or any other filings, don’t hesitate to contact us today. Available for all of your tax needs and filings, there are also a number of bookkeeping and payroll services offered to assist you and your business. We look forward to meeting you and serving whatever your needs may be soon!