Back in 2004, the Internal Revenue Service audited 1.9 of every 1,000 tax returns, down from 5.1 in 1996. Now it’s getting serious.
Audits are no fun. They suck entrepreneurs’ precious time, and worse, can lead to yet more audits down the road. Unfortunately, auditors’ nets can scoop up unwitting offenders and willful evaders alike.
“Many people get audited because they make a careless mistake,” says Bob Dudzinsky, a tax partner at BDO Seidman. “A mistake begs a question, and so then the IRS begins to question other items in the tax return.”
Here are seven ways to invite Uncle Sam’s scrutiny:
1. Misclassifying Workers
2. Underreporting Cash Income
3. Goosing Depreciation
4. Doing the S Corp. Shuffle
5. Dialing the Wrong Number
6. Taking Too Much Credit
7. Dicey Deductions
More more details on each way, go here.
Sadly, even the most careful and honest taxpayers can get caught under the spotlight, thanks to the reinstatement, in 2002, of the IRS random audit program.
Photo by Forbes.
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