Audits Up in Upper Tax Brackets
The fear of the audit may be diminished for those in the lower tax brackets as the upper brackets are seeing a rise in their chances. At least that’s what statistics seem to reveal. So if you make less than $200,000 per year, you may be able to breathe a sigh of relief.
The rate for audits by the Internal Revenue service were up 11 percent in 2010 from the previous year and more than double those done in 2001. The 11 percent increase means that about 1.6 million taxpayers were audited, a pittance in the grand scheme of things. Still, those in higher income brackets are at greater risk of audit than those in lower brackets.
Overall, the odds of being selected for an audit are almost as good as your chances of winning the lottery, although thoughts of winning the lottery don’t generally include a sense of fear and dread. Each year tax payers across the country wonder if they’re next to be drawn. The chances seem random, but it does appear that as your income goes up, your risk of audit also is on the rise.
Also those who are self-employed are at risk of being audited as the tax system makes underreporting and falsification of deductions easier than those with average jobs. The IRS takes extra precautions in making sure that the self-employed sector tows the line.
Other red flags can be those who claim car expenses as a deduction, so be sure to keep a meticulous log of daily business mileage, including odometer readings, dates, locations and meeting details. Keeping itemized deductions to a minimum depending on your income group, can keep the tax man at bay. Also, home office tax deductions should only be taken if you use your home as a principal place of business, not the occasional work-from-home scenario.
There are many other causes for the IRS to take note of your tax returns. If you happen to draw the audit straw, be sure to have good records and good representation.