after bailout, and Big Spending plans by President Obama and Congress,
the IRS is ramping up Tax Audits.
The IRS is going after the so-called $350 billion
"tax gap" by hiring new auditors (Revenue Agents) and attacking small
businesses and individual taxpayers. According to IRS estimates, every additional dollar
invested in enforcement - such as levies, bank levies, wage executions
and audits, yielded about four dollars in added tax revenues.
Many times the IRS takes advantage of the taxpayers poor record-keeping
and the taxpayer not knowing their rights.
Non-filers are always an easy target. Now,
the IRS is also focusing on taxpayers
who take excessive deductions, credits and exemptions to which
they are not are not entitled or which they overstate. The IRS
attacks the following:
Finally, if you receive a
notice from the IRS for an Audit:
- Itemized Deductions.
The IRS has "ranges" generated by computer for deductions. If
your deductions fall outside the accepted range that can trigger an
- Investment Income.
The IRS has matching programs with banks and investment houses to catch
people who do not report investment gains. Now, the IRS is demanding
increased reporting of the basis in the investment so gain can be
quickly checked by the IRS computers. Even more changes will take place
- Self-Employment Income.
The IRS loves to attack small business because so many of them have
enough trouble running their business they cannot keep perfect records.
The Revenue Agent audits the expenses and frequently denies the
deductions for "inadequate documentation."
- Cash Income. Small
businesses that have a lot of cash income are easy IRS targets.
- Home Office Deduction.
Unless your home is your main or only office, the IRS will challenge
the Home Office Deduction. If there is a home office listed, it is
automatically disallowed on audit.
- Alimony Expenses.
The IRS has a matching program to make sure the Alimony Income reported
and deductions match.
- Automobile Expenses.
No one keeps the records demanded by the IRS. Auto expense deductions
are frequently disallowed so try to keep the most detailed records