Now that the official tax season is over, you might find some relief in not having to deal with the IRS until next year. However, in some circumstances, they may not give you a choice.
In 2017, the IRS conducted over 1 million audits. Due to federal budget cuts, that is significantly fewer than the nearly 1.75 million audits in 2010. Either way, it might scare you to think that you could be at risk of an audit, but do you know why audits occur?
Why would the IRS want to audit you?
While you are aware that the IRS could potentially audit you, you probably do not feel as though you are at a substantial risk of this type of financial review. For most people, that is the case. However, being aware of some of the things that could trigger an audit may protect you and your finances from examination.
Among other reasons, the IRS might conduct an audit if:
- Your transactions involved large sums of cash
- You own your own home-based business
- Their computer system detects anomalies
- Your assets include international accounts
- They suspect you earned more than you reported and owe additional taxes
In general, taxpayers whose annual incomes exceed $200,000 are at an increased risk of being audited, since those with higher incomes tend to have more complex returns, which may increase the chances of errors.
It is not uncommon for taxpayers to make mistakes when they file. However, if your tax return triggers an audit, remember it is not the end of the world. As long as you filed your return truthfully, you can use an audit as an opportunity to learn about how you can do things differently in the years to come.