Are You Provoking A Tax Audit?

Earning Too Much Or Too Little

Most individuals agree it's better to have money than to be broke, but when tax season rolls around, it can feel like the opposite. The IRS puts most of its auditing resources into high-income returns. Twenty-seven percent of returns with over ten million dollars in income face auditing, while incomes between five million and ten million dollars come in at eighteen percent, and returns between one million and five million dollars are audited at a rate of nine percent. The overall average stands at less than one percent.

If you make big bucks, experts recommend keeping good records and getting the help of a tax advisor. The IRS audits both those it views as earning too much or too little. It reviews returns when the reported income appears below what the IRS calculates taxpayers should be earning under their living circumstances. For example, a single mother who made eighteen thousand dollars per year was audited because she lived in Seattle and the IRS calculated she needed a minimum of thirty-six thousand dollars annually to get by. To the IRS, this smelled of undeclared income, but n her case, there was no undeclared income, and she saved money by living with her children at her parent's house.

Continue reading to reveal how rental losses work when it comes to audits.