5 Audit Red Flags


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E

effi

William Brenner said:
don't forget a simple math error on the return

that can cause a return to be pulled from the "pipeline" and
looked at with more scrutiny by a human being, meaning
increased audit potential
 
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Paul Thomas

don't forget a simple math error on the return
that can cause a return to be pulled from the "pipeline" and
looked at with more scrutiny by a human being, meaning
increased audit potential
I have this mental picture of a GS-12 sitting at a
workstation sticking "red flag" post-it's on returns. Since
they work on a quota, a certain amount will get flagged no
matter what.
 
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D.D. Pallmer

William Brenner said:
Do you guys agree with that? Particularly the part about
not attaching statements? Seems to me that a tax return
with an unusual situation would be less likely to be audited
if the situation was explained upfront, rather than after
the IRS comes looking.
 
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L K Williams

Do you guys agree with that? Particularly the part about
not attaching statements? Seems to me that a tax return
with an unusual situation would be less likely to be audited
if the situation was explained upfront, rather than after
the IRS comes looking.
In the 25 years I've been working on taxes, I've never seen
any evidence that attaching a statement to a return has been
beneficial. Frankly, I don't think anyone at IRS even looks
at such statements.

Attaching statements also goes against my basic philosophy
of return filing. I don't believe you should tell IRS
anything they haven't asked for. Whether its on the return
or in an audit context, never refuse to answer, provide
everything they do ask, but don't volunteer anything! If
you can answer with a simple "yes" or "no", any additional
verbage should be avoided. If IRS wants to know "why" let
them ask and then tell them.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
 
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Ernie Klein

In the 25 years I've been working on taxes, I've never seen
any evidence that attaching a statement to a return has been
beneficial. Frankly, I don't think anyone at IRS even looks
at such statements.
Many years ago after my father died, my mother added me as
joint owner of a large quantity of stock that she and my
father had owned. She did this without my knowledge.
Somehow my SSN became the primary number on the stock that
the 1099 was reported to, but the dividends and 1099 were
all sent to my mother.

After I received a letter from the IRS asking me for (a lot)
more money to cover the stock dividends that were reported
against my SSN for stock I knew nothing about, I found out
what my mother had done. I wrote a response to the IRS
stating that my mother had received all dividends and had
paid all taxes. The IRS agreed and that was the end of it,
or so I thought.

Every year thereafter, for the next four years I went
through the same routine - receiving a notice from the IRS,
sending them the explanation, and getting a no change
acknowledgment.

Getting tired of this yearly routine, starting on the fifth
year, and every year thereafter until my mothers death, I
started attaching a statement to my return explaining that
dividends from xxx stock went to my mother who has paid all
taxes. I never heard from the IRS about the matter again.

I can only believe that someone did indeed pay attention to my statement.

--
-Ernie-

"There are only two kinds of computer users -- those who have
suffered a catastrophic hard drive failure, and those who will."
Have you done your backup today?
 
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