By Lindenberg Junior
In this short article that goes straight to the point, you will find the most common audit mistake by residents living in United States. What is it? Providing copies of your other year’s tax returns, and the reason is because doing so greatly expands audit risk by giving the auditor many things to look at that he otherwise would not see, like patterns of income and deductions amounts over multiple years.
So why do people bring previous years returns with them? Because the audit notice asks them to! But here is something important you should know: IRS rules state that you are required to provide only the information related to the specific tax year listed in the audit notice.
You are not required to provide information about any other tax year, except as it might relate to the year under audit as carryover items might. If the auditor asks you for a previous return, simply say “I don/t believe that this relates to the year or issues being examined”. Almost always, that will end the matter.
To finish, we would like to remind you that not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.
* This article, in part, had the consultation advice of taxes preparer and accountant Ricardo Countinho from RC Business in Los Angeles – www.rcbusiness.com.br
