Filing taxes can be a pain. No one wants to go through this process every year, and no one wants to pay more than they think they should have to. There are certain things some Connecticut residents may do when completing their taxes to help lower their tax liability. Unfortunately, some of those things may increase one's odds of being audited. What does the Internal Revenue Service look for when deciding who to audit?
In short, the IRS looks for anything out of the ordinary when determining if an audit is called for. With limited staff and resources, fewer people are being audited than ever before. According to reports, roughly 0.6% of all individual tax returns end up being flagged for audit. This does not mean that now is the time to push certain things through in hopes that one will not get caught.
So, what are some of the things Connecticut residents may do or claim on their taxes that put them at risk for being audited? The list is fairly lengthy, so only a few red flags will be listed here. Common red flags include:
- Making a higher than average income
- Failing to report income fully
- Taking too many deductions
- Claiming certain business expenses
- Claiming certain losses
- Owning a foreign bank account
- Taking early distributions from retirement accounts
Connecticut residents who find themselves being audited may feel intimidated by the process. Thankfully, legal counsel can help one get through this. At the end of the day, people who have documentation to back up everything that they put on their tax returns should have nothing to worry about. If an honest mistake was made, that can be quickly amended.