Kelly Bullis
You know one of the most wonderful feelings in life is knowing the IRS may be considering an audit of your business and or personal tax returns. …NOT! In fact, that thought sickens most folks. Being audited is a major interruption and hassle, even if you did everything right and end up with a no change in the end. Now that the IRS has some extra funding, they have a plan to increase audit rates.
Here are some audit triggers to be aware of. (There are a lot more than I have listed.) The IRS runs all tax returns through a computer filter. Those returns that get too many of these “triggers” may end up on the desk of an auditor to consider if they should audit you or not.
Aside from the obvious ones like, making a lot of money (more than $400,000 gross, before deductions), failing to report all taxable income and there was a third-party reporting on it to the IRS (i.e. 1099s), failing to even file a tax return, once again there were third party reporting involved, and operating a marijuana-related business.
Failing to report all gambling winnings. If you like to hang out at the “adult day care centers” a.k.a. casinos, don’t lose any of those pesky W-2s. At the end of the year, you have to report all of them, or you can expect a friendly letter from the IRS.
Incorrectly reporting the Health Premium Tax Credit. If you decided to sign up for “Obamacare” through a state health exchange, you MUST report all the premium credits you received. The IRS will have received a report on that and will be matching to what you report.
If you run a successful business, you have a big target on your back. The IRS is aware that there is a lot of sloppy bookkeeping out there and their experience has been an audit of a small business has a good chance of turning up significant adjustments in their favor. Two defenses you need. Have professional help with your bookkeeping and use a reputable CPA to prepare your tax returns.
If you run a business that consistently has losses and you have significant other income, you should expect the IRS to notice that. It is considered a major audit trigger.
Last but not least, if you engage in virtual currency/digital assets transactions, you can expect the IRS to give you a look. They are absolutely triggered about Bitcoin and its peers. They are convinced that mostly only criminals engage in crypto. There is a question on the face of form 1040 asking if you engage in crypto activity. Talk about hitting the big red button “audit me!” If you lie and answer no to that, the IRS considers that a potential criminal act. There are more and more third party reporting about crypto. If the IRS finds your name on any of them, you better have answered YES to that question, or you may be toast!
Have you heard? Prov 24:26 says, “An honest answer is like a kiss on the lips.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.