Many tax payers fear an audit. And, audits are worth fearing, since you can expect to spend lots of time justifying and proving your deductions if you undergo one. But, understanding IRS tax law and how returns are chosen for audit can help allay some of your fears. First, of all, it’s important to understand that your overall chances of undergoing an IRS audit are less than 2%. However, that being said, some individuals run a slightly higher risk than others, based on certain factors.
The IRS lacks the resources to examine a large number of returns, and to do so would not be cost effective. So, they look for people who meet certain criteria, appearing more likely to have broken IRS tax law, and they audit some of those returns. Here are some red flags the IRS looks for that, to them, might indicate that you’re more likely to have broken IRS tax law. Higher Income Means a Higher Chance of Audit – When your income exceeds $100,000 your chances of an audit increase from less than 1% to about 1.5%. Your chances are even greater if you have an income over $100,000 and you