IRS NOTICES

COMMON REASONS FOR IRS AUDITS

 

Personal Returns

Failure to file and Failure to pay (by far the largest percentage of audits) – Reasons:

 


Taxpayer filed his tax return late


Taxpayer received W-2s or 1099s and failed to file a tax return


Taxpayer has an active credit history but does not declare income nor file tax returns


Earned Income Credit – Low income taxpayer is claiming dependents in order to receive money from the government. Taxpayer must provide school and health records of the child


Taxpayer fails to declare investment income when he has received form 1099


Taxpayer declares investment losses several years in a row


Taxpayer takes deductions for household and child care but fails to furnish form 1099 to contractors/employees


Taxpayer declares losses several years in a row


Taxpayer claims large amounts of medical expenses relative to his income


Taxpayer declares large casualty losses when he is not in a disaster area


Taxpayer has deposited large amounts of cash in his bank accounts and has not filed a tax return


Taxpayer declares large charitable contributions relative to income several years in a row and he has not received any form 1098s


Taxpayer declares mortgage large interest deductions and has not received form 1098 from lenders

 

Business returns

Failure to file and failure to pay (by far the largest percentages of audits levied by the IRS)
(most common) taxpayer takes large deductions for labor and does not provide contractors with form 1099


Taxpayer officers do not take salaries


Taxpayer continues to declare heavy losses several years in a row without showing any profitable years


IRS feels the taxpayer is not declaring revenues relative to expenses


Taxpayer makes large bank deposits and fails to file a tax return


IRS may believe the taxpayer is taking pension deductions yet fails to fund its pensions


IRS may believe the taxpayer is overstating revenue in order to receive credit


IRS may believe the taxpayer is taking large bogus deductions in order to avoid tax

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