Red flags that will trigger an IRS audit

CHARLOTTE, NC (WBTV) - The Internal Revenue Service has released a list of audit targets this year.

"They look for the trends that might trigger them to review your return closely than other returns," said Najam Usmani with Jackson Hewitt Tax Service.

The odds of getting audited are low.

"About 1.1 percent of the returns were audited in the last few years but if you are the 1.1% you want to be prepared," said Usmani.

Some factors can increase the likelihood of such unwanted scrutiny:

  • A large number of dependent exemptions claimed by a head of household with low income
  • Significant nontaxable investment income
  • Self-employment income and no expenses, specifically when claiming the earned income tax credit
  • Unusually high deductions for home office expenses, travel and entertainment expenses
  • Unusually large amounts of deductions claimed, such as high charitable contributions

The IRS uses a computerized process to check all tax returns for math and clerical errors.

"What it does is it compares your information that you've sent to the IRS to file your tax return against the information that they've received from banks employees, W2's, 1099 and so forth," said Usmani.

So if you've sent information to the IRS that doesn't match "it's most likely that the software will pick that thing and a computerized letter will be sent to the tax payer," added Usmani.

And mistakes aren't only detected by the IRS for the current tax filing year.

"They can go back as many years as they want but we've seen people three to five year in most cases," said Usmani.

If you do receive an audit notice from the IRS, the most important thing to do is to acknowledge it.

Also don't rush to send the IRS additional money.

"Some of these letters that are sent by the IRS are not 100 percent accurate all the time," said Usmani.

"So it is important to get with your tax professional to review your tax documents before responding to the IRS."

If you remember the IRS started accepting tax returns about two weeks later this year than the usual date.

That means people have less time to file before the deadline of April 15.

Tax experts say they are seeing a surge of people coming in to file last minute and suggest you get yours done as soon as possible.

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