How to handle IRS tax audit
  • December 21, 2020
  • admin
  • 0

In 2017, the IRS selected over a million returns from 140 million taxpayers for a tax audit. Those chosen are for people who either made a mistake while filing their returns or did something else that triggered an IRS tax investigation or audit. Although the number of audits have since decreased, the government continues to pick some tax returns every year for additional review and scrutiny through computer algorithms. In this blog post, we discuss five lesser-known factors that can trigger an IRS tax audit. Read on!

1. When Taxpayers Fail to Report all Income

According to tax law, individuals and companies that hire taxpayers must report their pay both to the taxpayers themselves and the IRS. The IRS, therefore, receives copies of all of the 1099-MISC and W-2 forms filed by organizations for freelance work or employment and 1099s for dividend and interest income. All these incomes are tied to Social Security numbers, and if companies fail to report all the income to the IRS that the government is already aware of, this could be considered as a clear discrepancy in its automated system. Under such circumstances, the government can initiate an IRS tax investigation or audit of the affected returns.

Related Blog: Procedural Map to an IRS Tax Investigation

2. When a Taxpayers Has Extremely Low or High Income

The IRS is likely to be more interested in auditing taxpayers with extremely high and low incomes. The chances of an IRS tax investigation rise when people earn more than $1 million annually. Most of the time, people who have high incomes have multiple sources to generate money, which increases the chances of complex returns and multiple audit triggers. On the other hand, taxpayers who have low income are quite often questioned by the IRS about tax credit claims or excessive deductions.

3. When Taxpayers run a Cash Business

When taxpayers make large transactions of more than $10,000, businesses should report them to the IRS, even if they are just making a purchase. The same is true even if they make large deposits of cash into their bank account. Such cash transactions may raise questions with the IRS especially when taxpayers report a lower income. If taxpayers use a Schedule C when filing their reports and taxes mostly in cash income, the IRS can make extra checks to establish whether or not the taxpayers are overstating their expenses and can also trigger an IRS tax audit. When faced with such scrutiny, taxpayers may seek help from an experienced tax resolution attorney to clarify their income sources to the IRS.

Related Blog: Answering 5 FAQs about IRS Tax Lien Assistance

4. When Taxpayers Deduct Entertainment Expenses

Self-employed taxpayers are always more prone to tax audits by the IRS due to the greater flexibility they have in reporting their income and expenses. Some types of claims that draw more scrutiny are deductions for business travel, entertainment, and meals. If a taxpayer is an employee who has already been reimbursed by their company, they can’t claim these costs on their taxes as well. If the taxpayer is a business owner, they must make sure to keep documentation of the expenses along with the business purpose associated with them to play fair with the IRS.

5. When Taxpayers Itemize Their Deductions

After the Tax Cuts and Jobs Act in 2017, most taxpayers take the standard deduction on tax returns, which makes itemizing less accessible. Itemizing deductions is critical for many taxpayers who have a small business and complex tax returns. If they claim large charitable deductions, they may have to provide proof to the IRS for those donations as the government does not expect that people donate large percentages of their income and is skeptical about such large donations.

Wrap Up

Taxpayers must know that most disparities related to tax returns are flagged by IRS’s computer algorithms rather than human eyes. This computer system emphasizes certain types of large deductions, unusual claims, shared dependents, and many other questionable items. Taxpayers with complex returns must seek assistance from a Fort Worth tax resolution attorney who can help maximize their tax refund while staying within the protocols of the IRS. To discuss your case and learn how we can help, call (972) 426-2553 or fill our contact form for a free consultation. We have a team of highly knowledgeable and experienced IRS tax law professionals who can help you overcome any IRS tax problems.

Please follow and like us:

What Our Clients Have to Say

Brent VahleBrent Vahle
19:13 02 May 24
I called to see if they could help reduce some penalties and fees. The person I spoke with told me it might be counterproductive for them to take my case since their feels would likely equal the amount of penalty/interest abatement. I decided to pass on moving forward but was so happy to hear a legal team, or any business for that matter, who has that much integrity. I feel most others would likely try to take my money anyway. I hope I never have to go through this again, but if I do, I will definitely use the Law Offices of Nick Nemeth!
Jason WinkleJason Winkle
18:44 02 May 24
Jaime Flores was very friendly, professional, and knowledgeable. She gave me some very valuable information which helped guide me with a plan of action. The free consultation is very much appreciated.
Matthew SwigartMatthew Swigart
12:14 02 May 24
Great attorney who was able to provide quick and useful advice. Although my situation did not warrant their services, they still took the time to discuss solutions I could explore. I highly recommend visiting this office!
Tony PantojaTony Pantoja
12:57 09 Apr 24
Very professional and very knowledgeable, Jamie Flores was very straight forward and professional, a firm that doesn’t just take your money, Thanks
Carla AtwalCarla Atwal
10:52 02 Apr 24
Nick was wonderful in guiding me with direction on some tax questions I had. He was concise, and to the point, and was happy to provide general info to me at no charge. I truly appreciate him and would highly recommend him.
Miguel AlvaradoMiguel Alvarado
15:56 25 Mar 24
By far the best attorneys I have ever worked with. They’re are very helpful and supportive from day one. They went above and beyond to make sure all my documents were submitted on time and gave updates as soon as they received them. I cannot name a single flaw in their work. Their team of assistants are very professional and seem to all be on the same page. I’ve made multiple phone calls and sent a ton of emails to their staff and they were able to help me all through the course of the case. I cannot express my gratitude enough for how excellent they handled my case.
Lucy FoyLucy Foy
06:55 19 Jan 24
My first appointment I had with, Tax Attorney Nick Nemeth, gave me such a sense of relief. He listened and gave me his professional advice, Mr Nemeth took my case. I was well kept updated, by phone calls and letters. That really impressed me and gave me so much confidence in them. The case went on for a couple of months. The day I received the call from one of his team members Kyle, informing me that the case was resolved and that I owed absolutely nothing to the IRS, I was overwhelmed with joy. I would recommend this law firm to anyone that needs help, with any tax issue. Thank you, to the Law Firm of Attorney Nick Nemeth and his team.
Bradley RunyonBradley Runyon
20:17 13 Jan 24
I received a tax bill in the mail from the IRS last year in 2023. The fees and penalties I owed were something I myself could not afford. I reached out to Nick Nemeth's firm and received the best experience you could imagine. The team was professional, educational, and fast. If you have a tax issue with the IRS using another firm other than Nick Nemeth's would be an error in judgment. I would recommend their services above others.
Sue HulsemanSue Hulseman
19:55 11 Jan 24
Working with Nick Nemeth and his team to resolve my debt with the IRS was the best decision I could have made. I felt such relief knowing I didn’t have to deal with the IRS myself. They did a wonderful job and were responsive to my questions and kept me abreast of my case. My outcome was exactly what I was hoping for. I strongly recommend using them if you have an issue to resolve with the IRS.
20:53 21 Dec 23
I had an incompetent tax preparer, who also ignored several notices from the IRS, which in the end resulted in a lien on my property. I did not know what to do and an attorney friend recommended that I contact the Nick Nemeth Law Offices. I met with Jamie Flores and Ivan Nalbantov in December 2021 for a free consultation, and right away was impressed by their thorough examination of my paperwork and extensive knowledge of IRS tax laws. I felt not pressured and appreciated their advice and in the end decided that I would pursue resolving the issue by myself. I paid the IRS Civil Penalty and, as recommended also submitted a letter to the IRS requesting a refund and explaining what happened. I am glad to report that my persistence finally paid off. My case took two years to resolve and I finally received a full abatement/refund check from the IRS in December 2023. I could not have done this without the straightforward recommendation of Jamie and Ivan; and I highly recommend the Nick Nemeth Law Offices to anyone needing help with the IRS.
Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
00:33 07 Aug 22
I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
23:49 03 Aug 22
The Nemeth Law team is exceptional. They treat their clients like a family member who is in crisis. They want you to get the best possible outcome. I really appreciate everything that they did for me. Jake and Ashley had the greatest role in my case and it all turned out for the best for me. Thank you Nick and team for easing my fears and getting me through the long process. I'm truly grateful.
Eddie WaltEddie Walt
19:44 12 Jul 22
During a time in which competent, professional service at a fair price seems to have disappeared, Mr. Nemeth and his team are a refreshing breath of fresh air.From my first phone call to the final settlement of our case with a non-responsive IRS, they under-promised, over-delivered and were in constant courteous contact to make sure we knew exactly what was happening and where we stood.I hope to never need their services again, but, should I receive another friendly letter from the IRS...I know who to call!
Quick Inquiry


    Enter the text you see above