IRS audits looking for unreported income

The primary focus on IRS audits is looking for unreported income. 

The cash disbursement method analyzes all the deposits to the accounts and compares the total of the deposits to the amount reported as gross income on the tax return.  The IRS will also analyze the changes to the taxpayers net worth.  The third area is the taxpayer's lifestyle.  The IRS will reconstruct the taxpayer's monthly payments and compare them to the claimed income. 

If you report income of $60,000 why did your saving account increase by $100,000?

If you report income of $30,000 per year how do you afford a house with $3,000 per month payments and a car with $1,000 a month payments?  How do you make up the short fall each month?

If you pay your bills in cash do you have corresponding cash withdrawals from your bank?  If not where did the cash come from?

If you have a small business that has losses year after year why are you still doing it?  Cut your losses and close the business. 

If they don't match the IRS assumes you are hiding income.

What are the odds of being audited?  Average wage earner about 1 in 100.  Have a Schedule C for a small business about 1 in 25.  Have a Form 2106 for unreimbursed business expenses about 1 in 25.  Have a Schedule E for rental properties about 1 in 25.

Have a S Corporation or Partnership about 1 in 250.  May want to consider converting your Schedule C business or Schedule E rental to a corporation or partnership.

Call us at 702-796-1040 for more information.