Are you worried about getting audited by the IRS? It can be a daunting prospect, but there are certain things you can pay attention to that might help you avoid an audit or at least be better prepared for one.
According to John Milikowsky, founder of Milikowsky Tax Law, there are three key triggers that might prompt the IRS to audit you: delinquent returns, cryptocurrency, and mismatches of income.
If you have not filed your tax returns for more than three years, you have a higher risk of being audited. The government is keen to ensure that all taxpayers are meeting their tax obligations, so it’s important to make sure you are up to date with your filings.
With the rise of cryptocurrency, the IRS has become increasingly interested in tracking down those who are not reporting their virtual currency holdings. In fact, there is now an entire section on the tax return for reporting cryptocurrency income, and the government wants to know the source of your income, whether you received it as a gift, and any transfers you made. It’s important to keep good records and ensure that you are reporting all of your cryptocurrency income.
Mismatches of Income
The IRS receives information returns from third parties, such as 1099s and W-2s, which report your income. If you have a job or own a business, you will have received these forms, and the IRS will expect your tax return to match the information they have on file. If there are any mismatches, your return could be flagged for audit. To avoid this, it’s a good idea to request a wage and income transcript or an Erpta report before filing your return.
What to Do If You’re Audited
If you do get audited, there are a couple of different types of audit that might occur. In many cases, you will receive a correspondence audit, which means the IRS will send you a letter requesting additional information or documentation. In other cases, the IRS might send someone to contact you in person and request all of your documents. It’s important to respond promptly and provide all the information that is requested.
In conclusion, if you want to avoid an IRS audit, make sure you are up to date with your filings, report all of your cryptocurrency income, and ensure that your tax return matches the information the IRS has on file. And if you do get audited, don’t panic – just make sure you respond promptly and provide all the information that is requested. With a little bit of preparation and attention to detail, you can stay on the right side of the IRS and avoid any unnecessary stress or hassle.