![]() “The IRS can easily check income reported on tax returns against what employers, banks, brokers and others report. “The surest way to get a letter from the IRS is to omit any amount of income from their return,” says Pickering. ![]() “If you haven’t reported income from the various forms, 1099s or W-2s, you will likely be audited.”Īs you gather your tax records before you file, make sure you’re not missing any W-2s or 1099s - especially if you did freelance work for several employers or if you changed jobs in the middle of the year. “It is almost automatic that the IRS will do a cross-check to make sure all of the income reported on Form 1099 is also reported on the appropriate lines of the tax return,” says Freedman. If the numbers are different, expect to hear from the IRS. You’re not the only one to receive the W-2 forms and 1099s reporting your income the IRS gets copies, too. Here are some common red flags that can trigger a tax audit and what you can do to avoid problems with the IRS. “If you are entitled to deductions or losses and you have adequate documentation to support these expenses, a taxpayer shouldn’t fear an audit, even though it might be stressful,” says Mitchell Freedman, a certified public accountant in Westlake Village, California. The IRS generally has up to three years after the tax-filing deadline to initiate an audit, or up to six years if you omit 25% or more of your income. ![]() “When they do this, they are leaving their money on the table.” “Taxpayers worried about the possibility of facing an IRS audit may hesitate to claim all the tax breaks they are entitled to claim,” says Kathy Pickering, chief tax officer at H&R Block. Even though the IRS only audited 0.3% of individual income tax returns in 2020, many taxpayers live in fear of a letter from the IRS questioning items on their return. ![]() The IRS may choose to review a taxpayer’s accounts and financial information to ensure all tax laws are being followed.
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