Reasons retirees may face tax audits

On Behalf of | Dec 13, 2018 | Tax Audits

When one leaves the workforce to retire, one would think that taxes would get easier. Unfortunately, they do not. There are a number of reasons why retirees in Connecticut may face tax audits.

The first reason to be discussed is: making too much money. Is there really such a thing as making too much money? According to the Internal Revenue Service, there is. Those who are retired and report incomes between $200,000 and $1 million are more likely to be audited.

The second reason to be discussed is: not fully reporting taxable income. Copies of all 1099s and W-2s get sent to the IRS. They will know if a person fails to include this taxable income in their tax filings.

The third reason to be discussed is: taking big deductions. This is not necessarily a problem for retirees only. Anyone who does this may be subject to an audit. If one has a valid deduction, take it; just be ready to back it up with the necessary documentation.

Finally, the fourth reason to be discussed is: failing to take the minimum distributions from pension or retirement accounts. Individuals over the age of 70.5 are required to take minimum distributions from these accounts. Those who fail to do so may be hit with a significant penalty.

These are only a few of the reasons why retirees in Connecticut may face tax audits; there are a few more. Those who are concerned about their tax filings, or who have tax questions that they need answered, can turn to an experienced tax attorney for assistance. With the right help, one may be able to avoid a tax audit entirely.