How Does The Government Decide Who To Audit?
Taxes are always on everyone’s mind. They get a great reminder of how much they pay into their taxes every few weeks when they get their paycheck with the breakdown of where all their money really goes. Many people save every single receipt so that they can have more tax deductions. Being able to save every little penny so that they don’t have to pay more money to the government for taxes is key! Another big factor when it comes to taxes is how to avoid an audit. Not everyone can avoid an audit. A key question many people ask is “WHY ME?” Why did they get chosen to be audited? Well there are some triggers that the government monitors which have a big factor of who gets chosen t be audited. If you can avoid these triggers, you are not guaranteed to not be audited, but it will help reduce your chances.
Any deduction that is considerably higher than it should be based on your income bracket will shoot a red flag to the government. If a taxpayer is at the lower part of an income bracket, but claims the upper amount of deductions within that bracket, it could cause a case of interest to the government, and could cause enough interest for the government to decide an audit is a good idea. Even though the deduction is acceptable within the bracket, it may still raise eyebrows and make a taxpayer more considerable to be chosen for an audit.
A profession where an employee deals with a lot of cash is a high risk to the government. An example of this would be a waiter/waitress or a bartender. Someone who has access to numerous amounts of tips can be considered for an audit. The government will look into what money was deposited into accounts versus claimed income.
High income causes a case of interest for the government when it comes to audits. The more money you make the
more likely you are to get an audit. The higher the income bracket, the higher your chances are of being audited. Although, those that make a lot of money tend to pay more taxes, it doesn’t matter. They are more likely to be chosen for an audit.
Those that are self employed are a great audit risk. The reason being is because people who are self employed, can easily try to hide money earned. They also tend to keep track of the bottom line very closely. Many who are self employed write off as many expenses as they can, and the government likes to make sure that they are justified before acceptance.
Although these are great factors when it comes to who gets chosen for an audit, these are no guarantees. Many people who do not fit in any of these categories are chosen for an audit just because of randomization. In case of an audit, keep track of all your records, books, and receipts so that you can get through it with the least amount of stress possible.