Did you know the president of the United States is audited every year? It’s just one of the many sacrifices they make for our country.
Thankfully, for the rest of us, the odds of being audited are considerably lower.
But How Much Lower?
If you take a surface level look at the number of taxes filed every year vs. the number of audits the IRS performs, the odds are less than 1% that you’ll be audited. In fact, due to budget cuts the IRS has recently undergone, your chances of being audited are lower than ever.
And if you’re just filing standard personal taxes (no business expenses, rental properties, etc.), the odds of being audited are closer to 0.3%. Awesome, right?
Well, Those Odds Can Change Fast
IRS auditing is not randomized. Okay, it can be actually, but that’s rare and actually used to set a baseline for their computer system. The majority of audits that take place every year are due to errors and questionable activates. If there’s a mistake in your files or the math doesn’t add up, the IRS has a system in place to flag it.
Now, even if you’re flagged, you actually might not be audited right away. But the IRS will keep a closer eye on your activities in the future. In fact, it’s possible you’ve been flagged in the past, and they’re already monitoring you closely, just waiting to issue an audit.
Mistakes aren’t the only cause for getting flagged. People can “tell on you”. True story. If a person has allegations of you being shady with your finances, they can report it to the IRS. The IRS even rewards people if they provide a tip that results in extra taxes for them.
Lastly, if you have ties or investments in another business or organization that gets audited or runs into tax trouble, you could get audited as a result.
The Best Defense is a Good Accountant
The best way to keep yourself protected against an audit is by getting your taxes done correctly. Make sure the proper forms are filled out, all the dollars are accounted for, and the math is done correctly.
You can do that by hiring a tax professional. Not only will they do the work for you, but they’ll likely find deductions and other tax saving opportunities you otherwise would have never known about. In the end, you not only save time and energy, but you could very well save money.
For personal taxes and small business accounting in Springfield, Ohio, LWS Tax is here for you. Contact us today!