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Vonore, TN 37885

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What Are Your Chances of Being Audited?

Friday, June 2nd, 2017 | Uncategorized | No Comments

All taxpayers have wondered if they will be subject to an audit by the IRS. As a tax preparer, I am often asked the question, “What are my chances of being audited?” This month we will examine this question.

The most recent statistics available are for fiscal year 2016, which includes income tax returns filed in calendar year 2015. For calendar year 2015, 1,034,995 individual income tax returns were audited, which represents 0.7% of all individual income tax returns. Of the tax returns audited, 36.7% were selected on the basis of the earned income tax credit. If we remove the returns examined for the earned income credit, the percentage drops to 0.5%. The only area of increased audits in 2015 for individuals was for returns with farm income.

Audits are not limited to an audit conducted by a revenue agent. For the timeframe we are looking at, 76.4% of all audits were correspondence audits. Many of these correspondence audits are the result of discrepancies between the return and related information returns. Another area of correspondence audits for individuals is documentation of deductions.

What does increase your chance of an audit? As mentioned above, discrepancies between the tax return and information returns such as W-2s, 1099s, and broker statements. Other areas include requesting a ruling or a determination letter, filing an offer in compromise, filing a claim for refund after your initial return is filed, the IRS discovers a substantial deficiency on audit of a prior year’s return, or your return has been prepared by a return preparer who has a history of preparer violations or misconduct.

In summary, your chance of an audit increases if the IRS thinks you fall into a category where they think there is the opportunity to increase tax revenue. If you are audited, the key is documentation, and remember your first contact is your tax professional.

Allen A. Scott, CPA
111 East Broadway
Lenoir City, TN 37771
(865) 986-4035
allen@ascottcpa.com

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East Tennessee's Mountain Views

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