In the complex world of taxation, it’s obvious that people can feel overwhelmed by the laws and the complexity of the process. Here, one must take note that ignorance is not bliss when it comes to tax matters.
If there is a persisting tax discrepancy, then you can trigger the IRS officers to arrange an audit to check your tax and income files, and this can be more troubling for an individual or a business.
You can take the help of a tax law attorney who can make you aware of some of the issues that can trigger tax audits from the IRS. They are also capable of guiding you on other legal matters and other compliances.
In this blog, we will look at some of the red flags that could trigger the authorities to check your tax files and how that can trigger an audit.
1. Incomplete or Inaccurate Information on Tax Returns
Incomplete tax files are one of the main reasons which can instigate an audit due to wrong financial reporting. In the tax files, one must provide their accurate income, which is earnings in an entire year, and based on that, they can apply for deductions or credits. However, hiding income is considered an offense, and for that, the IRS can start an audit process to find the truth about your annual income.
Here, out of error, we also sometimes report the wrong tax files as we have miscalculated the total income or the amount that we have mentioned as an expense. For that, proper documentation is required, and with the sales bill, one can prove their expenses, and in case of an audit, they can show that as a form of verification.
2. Discrepancies Between Income and Reported Expenses
Now, another thing that can cause trouble is the discrepancies in the tax files. One time, you are reporting a certain amount as your income, and in other instances, it is increasing or decreasing significantly. Then, in those situations, you can trigger an IRS audit again.
Tax attorneys in Los Angeles or from other locations are the experts who can guide you through the accurate process of tax reporting. If truly you have a fluctuation in your earnings multiple times, then you must mention the nature of work and how you make money from it. By doing that, you can make the authorities understand your case, and for this, they can leave your tax file and leave you from instigating an audit.
3. High-Income Earners and Complex Financial Transactions
There are different ways of scrutiny that the IRS applies to people who are high-income earners and engage in complex transactions that are mainly cross-border. In those situations, a person must mention the causes of a few such transactions; otherwise, it can raise red flags among the authorities. An IRS audit lawyer in Los Angeles can guide you about the clauses that can help you to save your financial gain and will keep you protected from fines and penalties from the tax authority. Hence, with the help of proper guidance, one can avoid these three grave mistakes and stay below the radar of the IRS.
