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Years ago, I was helping a banker with his tax return, and he complained that his bank was having problems with borrowers who submitted phony tax returns. I told him that if he wanted to assemble his staff for one hour, I could show them exactly how to identify a made-up return and find the lies.
I even bet him that I could tell him more about the borrowers, their lives, and their finances than he and his staff could learn from the application. We performed a blind test, where they removed all identifying information about the client—and I won.
If I can do that, so can the IRS!
People come to TaxMama all the time to ask me to help them or their clients during IRS audits. Invariably, when I look at the tax return that was selected for audit, it’s obvious to me that it was just begging to be audited.
Look at your own tax return for these obvious signs:
Do you have errors and inconsistencies all over your tax return?
Is your taxable income zero or less than zero (when you subtract your itemized or standard deductions from your adjusted gross income)?
Do you have very high itemized deductions—and very low taxable income, or none?
Do you have several Schedule Cs (Profit or Loss from Business) in your tax returns, with losses or very little profit?
Are you taking disproportionate deductions for meals, entertainment, or travel?
Is your business showing a substantial loss, with modest income and no advertising expense?
These are some of the obvious, commonsense things that come to mind. Though after you’ve been looking at tax returns for twenty or thirty years, some things just stand out as being obvious—without your being able to define why up front. Fortunately for you, many of the longer-term employees at the IRS are retiring. The new ones don’t have this level of insight—yet.
Medical Tax Deductions Are Worth More Than You Think
5 Tax Lessons Learned from Filing Your 2010 Tax Return
Last-Minute Tax-Filing Tips: 6 Mistakes Every Tax Filer Should Avoid
Strategies to Ensure You Get Credit for Your Charitable Deductions
Do I Get a Deduction for My Gifts? Or Do I Get Punished for Being Generous?
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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