Causes of IRS Audit

Video Transcript

What are the main causes of an IRS audit? An IRS audit can be conducted purely because you've been selected randomly by the IRS's random audit selection process, or because there was something identified on your tax return that has caused a flag to occur and the IRS wants to take a deeper look at that issue. Some of the things can also be that there are individuals that phone in tips to the IRS. They might call the IRS and say, "I know there's information that hasn't been reported on a taxpayers return." They would evaluate the return and consider whether that would be worth conducting an audit for. But, if you look at your return, you want to make sure that on the return you don't have things like numbers that have been scratched out and another number written in. You want to make sure that all social security numbers that should be on the return are included. That's both for the taxpayer and the taxpayer's spouse, and for the dependents. The names on the return have to accurate as well. If you have numbers that have been scratched out and another number written in, then make sure that you have re-added the numbers on the return as well. On page two of the return, you also want to make sure that you sign and date your return. And that would both be for the taxpayer and the spouse before the tax return is submitted. If you have additional schedules for your tax return, you need to make sure that they are all attached as well. If you have a schedule C, you need to make sure that all the information is included as well. Particularly, on the schedule C, if you have information that's in the cost of goods sold section or in the other expenses section, then that information needs to be on the page two supporting schedule as well. You want to make sure that all the schedules that need to be attached to your return are attached to your return, or the IRS might need you to bring in additional information so that you can support the information that has been claimed on the return. It's not just the expenses that the IRS could be auditing, but also the income as well. So, you may be asked to bring bank statements to show income on one side, or receipts, checks, and bank statements to show expenses on the other side, or other forms of documentation. But the way to avoid an IRS audit in the first place is to make sure that your return is clear, concise, neat helps, and that all information that needs to be included on the tax return is included. You don't need to attach copies of receipts and other documentation, but you do need to make sure that the return itself is complete and accurate.

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