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What Can Trigger an IRS Audit?


can you deduct your home office from your taxes if you work from home

The IRS may choose to audit a taxpayer’s accounts for a number of reasons. In general, the IRS has up to three years after the tax filing deadline to open up an audit. However, individuals who didn’t report 25% or more of their income can be audited up to six years after filing their taxes. Dealing with an audit can be stressful, and it’s usually best to have a tax professional on your side to ensure you gather all the necessary documentation. Here’s a couple of reasons why the IRS may open an audit on one of your tax returns.


You Omitted Part of Your Income


One of the most common reasons the IRS will open an audit is if they suspect a taxpayer did not report all of their income. Your employer doesn’t just send your W-2 to you. The IRS gets a copy of any filed tax documents, meaning if the income you report doesn’t match your copy, there’s a good chance they’ll open an audit. As you’re getting ready to file taxes, it’s important to ensure you’re not missing any tax forms. For example, if you’re on a W-2 from your employer but do some freelancing on the side, be sure to include the income on any 1099s in your income.


You Claimed the Home Office Deduction but Aren’t Eligible


The home office deduction might provide a valuable tax break to some individuals who work from home. If you work from home, you can write off costs like Wi-Fi, office materials, and even a portion of your mortgage or rent. However, in order to claim the home office deduction, there are eligibility requirements that apply. To qualify, you must “regularly and exclusively” use your home office for business. This means you must designate some area of your house for business use and nothing else. To avoid troubles with the IRS, it’s best to keep records of all the expenses you plan on claiming.


You’ve Reported Excessive Business Losses


Business owners may be eligible for several deductions. However, if year after year, your business has been reporting a loss, it becomes questionable to the IRS. It’s normal for most businesses to report losses in their early stages. However, it becomes suspicious if your company never reports a profit. If your business is really struggling, you’ll likely need to prove to the IRS that you have a business plan with a profit motive. In the case the IRS audits you, it’s important to have detailed records of not only your expenses but also your business plans.


You Failed to Pay Taxes on Stock Trades


Stock trading is gaining in popularity. However, unless your stocks are in a tax-deferred retirement account—like a 401(k)— they are subject to taxes. If you sell any shares, both you and the IRS will receive a copy of Form 1099-B from your brokerage. Once you receive this form, you will need to report your capital gains (or losses) on Schedule D as part of your income tax return. If you fail or forget to report your stock trades, you could get contacted by the IRS for an audit.


Choose Morgan Sebastian for Help With Your Taxes


At Morgan Sebastian Law, Attorney Becky Sebastian is eager to help you navigate the complexities of filing your taxes. As a trusted tax resolution lawyer, Attorney Becky Sebastian has years of experience representing business owners and individuals who are experiencing tax audits, wage garnishment, and other tax-related issues. She can provide you with the professionalism and peace of mind you deserve when dealing with the IRS.


To schedule a consultation with an experienced tax resolution lawyer, call (877) 223-6605 or fill out our online contact form.