Q: Tax season is at hand. My concern is a tax audit. Have never ever had that issue, but exist certain "items" that may set off an IRS audit?

P.N., Los Alamitos



A: The IRS indicates that audits can be activated through a random choice process by which an electronic system compares a return against norms for comparable returns. An additional trigger is when the info on your return is connected to someone else who may be a service partner or financier, and that individual is being investigated.

Research study indicates that recently, the IRS has actually audited those whose earnings are listed below $25,000 or above $500,000. In 2015 (I am reading), 3.8 out of every 1,000 returns were audited by the IRS. The opportunities of an audit are modest, however your issue is well comprehended. Fundamental, there is no alternative to working carefully and accurately on your return, which may require the assistance of a tax expert.

From reading, here are various items that might trigger an IRS audit:

• Excessive property reductions by property owner and investors.


• Not including all of the dividends and interest you earned.


• Missing capital gains, such as on stock sales.


• Failure to report cryptocurrency (evidently, cryptocurrency has actually been a stalking horse for the IRS).


• Filing late.


• Not reporting all of your earnings (which also ties in to "b" and "c" above).


• Claiming extreme charitable deductions.


• Running a cash-based service, particularly if you combine lower profits with big cash transactions.


• Deducting a range of home entertainment expenses.


• A home office reduction might sometimes raise a pink flag.


• Using what are "cool numbers" e.g., round and tidy, as it were.


• Making mistakes.

Q: How do you discover if you are being examined by the IRS, and then if you are, what do you do?

M.G., Santa Clarita

A: If you are going to be audited, it will come from the IRS through the mail as a licensed letter. Do not mistake correspondence from the IRS that shows you owe cash as notice of an audit. In addition, while easier said than done, do not quickly enter into a panic. The government is double-checking your numbers. If you are confident in your return, the process must not turn up undesirable surprises.

Research likewise highlights that it is essential to remain professional and polite, and keep the due dates in mind (however, if you require more time, then ask the auditor for more time). Assess how finest to deal with the situation.
The IRS has an online link that seeks to supply information about an audit: irs.gov/ businesses/small-businesses-self-employed/irs-audits. Or, in your web browser, type "IRS.gov., audit".

Ron Sokol has actually been a practicing lawyer for more than 40 years, and has actually likewise served sometimes as a judge professional tem, mediator, and arbitrator. It is very important to bear in mind that this column provides a summary of the law, and is not to be dealt with or considered legal guidance, let alone an alternative to actual assessment with a qualified professional.