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Article: Are You at Risk for an Irs Audit?

In summary, it is important to take steps to avoid being audited by the IRS, such as keeping detailed records of business expenses, ensuring that home office deductions are legitimate, and being careful with charitable donations. It is also recommended to double check the math on tax returns and consider purchasing audit protection from tax software programs.
esavvymom
Staff member
7,895
I saw this today.....good tips for tax time.
http://www.wral.com/5onyourside/story/10844858/

Some taxpayers are more at risk of being audited by the Internal Revenue Service, but you can take action to not draw too much attention to your tax return.

Accountant Alan Rosen has had clients get letters from the IRS announcing that they are being audited.

"The first thing that goes through their mind is absolute panic that they're being audited," he said. "What did they do wrong? They can't believe it. There goes everything they've worked for, saved for all these years."

For people who earn less than $200,000 a year, the likelihood of being audited by the IRS is about one in 100. The odds, though, go up significantly for certain types of taxpayers.

"Taxpayers who have their own business and itemize deductions for home office, telephone, business meals*– they need to be extra careful," Tobie Stanger, with Consumer Reports, said.

Business expenses such as meals or travel are one of the first things the IRS goes after. They could be considered personal expenses.

Consumer Reports advises keeping a detailed calendar of your business meetings and hanging onto the actual receipts, not just credit-card bills.



If you claim a deduction for a home office, make sure it looks like an office. It can't double as a laundry or playroom.

"Another red flag that can attract the attention of the IRS is excessive charitable donations. If you're donating 50 percent of your income, that can seem out of place," Stanger said.

With donations, make sure you have dated receipts. They are required for cash donations of $250 or more and for gifts of clothing and furniture.

"You should keep your tax records for as long as the IRS can audit you, which is three years. But just to play it safe, we recommend holding them for seven," Stanger said.

Check and re-check the math on your tax return. Simple errors trigger the most notices from the IRS.

If you do your taxes yourself, two of the leading software programs, H&R Block At Home and Turbo Tax, offer some level of additional help in the event of an audit. You might need to buy the audit protection in advance.
 
Thanks! Just sent in my taxes today! Fingers crossed!
 



As a fellow taxpayer, I completely agree with the tips mentioned in this article. It's important to be aware of the red flags that can increase the chances of being audited by the IRS and take necessary precautions to avoid them. Keeping detailed records and receipts is crucial, especially for business expenses and charitable donations. And double-checking the math on your tax return is always a good idea. It's also reassuring to know that there are software programs available that offer additional help in case of an audit. Overall, being proactive and careful with our tax returns can save us from a lot of stress and potential penalties. Thanks for sharing these helpful tips!
 

What is an IRS audit?

An IRS audit is a review of your tax return by the Internal Revenue Service to ensure that the information reported is accurate and the taxes owed have been correctly calculated.

What are some common red flags that may increase the chances of an IRS audit?

Some common red flags that may increase the chances of an IRS audit include high income, claiming large business losses, excessive deductions or charitable contributions, and inconsistent information reported on different tax forms.

How likely is it to be audited by the IRS?

The chances of being audited by the IRS are relatively low. In 2019, the audit rate was only 0.45% for individuals and 0.59% for businesses.

What should I do if I am selected for an IRS audit?

If you are selected for an IRS audit, it is important to respond promptly and provide all requested documentation to support the information on your tax return. It may also be helpful to seek assistance from a tax professional.

What are the potential consequences of an IRS audit?

The potential consequences of an IRS audit can vary depending on the findings. If the audit results in a change to your tax return, you may owe additional taxes, penalties, and interest. In some cases, an audit could also lead to criminal charges if there is evidence of intentional tax fraud.

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