Income Tax Preparation Denver – What Raises a Red Flag in IRS Audits?

Nobody likes being audited by the IRS. Even if the IRS has been chastised, there is still a possibility that your return may be identified for an audit. Due to a lack of people and funds, the IRS audits very few people every year. As a result, the chances of your return being selected for review are slim. Of course, the only reason filers should be concerned about an audit is if they are evading taxes. A tax audit is carried out by the IRS when they see certain red flags in your file. These are some of them which you need to be aware of.

Not Reporting All Your Taxable Income

Institutions like banks, your employer, or your clients are required by law to provide W-2s, 1099s, and other IRS forms to the IRS. The IRS matches the amounts submitted by them to the income tax return that you file. Discrepancies will raise a red flag and will result in a higher tax bill.

Charitable Donations

Donations are a great tool to write off some taxes. But they can also cause the IRS to be suspicious if you make large charitable donations disproportionate to your income. You need to look up what is the acceptable charitable contribution based on your tax bracket. If the IRS thinks that you are donating more than you can afford, it raises a red flag. 

Foreign Bank Accounts

If you have money saved in bank accounts outside of the United States, the IRS is quite interested in learning why. If you fail to reveal your international bank accounts, you might face a hefty fine. If you have a foreign bank account in a renowned tax haven, this raises suspicions even more.

Crypto Trading

Cryptocurrency trading is not treated as a cash transaction. The IRS looks at crypto trading in the same way that they look at buying and selling property. The rules are quite complicated regarding this and you need to talk to an accountant if you are making large trades in crypto.

Keep the process easy and hire us at Fast Action Taxes, the Denver Tax Accounting Firm. We can help you file on time and make sure it is done correctly. We have vast experience and make sure that any potential red flags are avoided.