Common reasons for audits

A majority of taxpayers in Maryland and the rest of the country normally do not have to go through an audit. However, there are certain issues on a tax return that may compel the Internal Revenue Service to take a second look.

Because of the increased likelihood of making a mathematical error, people who file paper returns have a greater chance of being audited. According to one popular online tax preparation service, the error rate for paper returns is 21 percent, much higher than the 0.5 percent for returns that are filed online. In addition to math errors, handwriting that is difficult to decipher may also give the IRS cause to perform an audit.

A home-office deduction is another audit flag for the IRS. However, this applies specifically to deductions that seem excessive. The home-office deduction is permitted only for space that is used solely for the home-based businesses. Claiming deductions for the largest room in the home that is also used for other purposes may seem suspect.

Reporting no adjusted gross income or claiming the Earned Income Tax Credit while reporting no adjusted gross income will also get the attention of the IRS. According to IRS estimates, the annual percentage of fraudulent EITCs range from 21 to 26 percent. In 2015, the Treasury Inspector General for Tax Administration determined that $15.6 billion in EITC payments were erroneously issued. In 2014, even though 1.8 percent of returns submitted that year had no adjusted gross income, audits were conducted on 5.26 percent of them.

A tax attorney may assist clients who have been randomly chosen for federal tax audits. The attorney could act as a client's tax audit representative and, if necessary, dispute the results of an audit examination.

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