Between one and two percent of all individual tax returns filed in any year will be selected for audit.

Unless there is suspicion of fraud or substantial understatement of income, the IRS has three years from the due date of your return to initiate an audit. Typically, most returns are selected within two years of their filing date.

While there is no guaranteed when it comes to avoiding an IRS audit, there are some simple things we ask of our clients which can reduce audit exposure, or in the rare instance of an audit, can eliminate unnecessary penalties and interest.

1.  Provide us with all information necessary to prepare your return.  This enables us to cover all aspects of your tax liability and take advantage of all possible deductions.  Forgotten items such as 1099s raise red flags with the IRS.

2.  Be honest.   We will not act as an auditor and, in most cases, we do not ask to see all your documents or request proof of the figures you give.  Although we as professional tax preparers are subject to penalties for negligence of intentional disregard of an IRS regulation, we are not held responsible for processing false information which was provided to us by our client.

*We comply with all rules and regulations set forth by the Internal Revenue Service.  As your tax preparer, we cannot knowingly omit or alter information provided by the taxpayer.

Remember, your name goes on your tax return, and it is your name on the IRS file. The penalty for filing false information to the IRS is severe. Be sure to claim all the deductions for which you are eligible, but be honest.

Higher Audit Risk Situations

1. Tax protests. Both the IRS and tax courts are getting fed up with what they consider frivolous tax protests. If you file a return stating that you owe no tax because the dollar is worthless or make some other such protest, you'll probably be audited.

2. High income. Because auditing higher-income taxpayers is likely to produce more additional tax revenue than auditing lower-income taxpayers, this category is targeted by the IRS.

3. Certain occupations. Taxpayers whose occupations produce cash income, such as taxi drivers and waiters, run a higher risk of being audited. Self-employed individuals, particularly independent contractors, are IRS targets for the same reason; they are more likely to have unreported cash income.

4. No preparer or a problem preparer. If you have a complex return and prepared it yourself, or if your return was prepared by someone on the IRS's problem preparer list, you are more likely to be audited.

5. Certain deductions. The IRS has found it profitable to audit returns that claim office-in-the-home deductions, travel and entertainment deductions, and certain other write-offs where they feel taxpayers stretch the truth.

6. Related party transactions. Taxpayers who involve family members in their financial operations are more likely to be scrutinized by the IRS. Paying wages to your children, lending money to relatives, splitting income among family members, or running a family business will make the IRS more interested in your returns.

IRS Representation

As a Certified Public Accountant, Egon Stockenbojer, CPA can represent you in the proceedings of an IRS audit.  If you are notified you have been selected for an audit, contact our office immediately.