February 2018 Archives

What may cause the IRS to issue an audit

Fewer than 1 percent of all tax returns in Maryland and throughout the country are audited by the IRS each year. However, some types of returns are more prone to audits than others. For instance, those who have a high income are more likely to get audited because a taxpayer error will affect more money owed to the government.

Report urges IRS to improve detection of fraudulent EIN use

Businesses in Maryland obtain their employer identification numbers from the Internal Revenue Service. A report prepared by the Treasury Inspector General for Tax Administration criticized the tax agency for its vulnerability to EIN abuse by fraudulent filers that steal existing numbers or gain numbers for fake business entities.

How to prepare for a tax audit

Maryland residents may be in the process of collecting information to complete their tax returns. Ideally, an individual will take as many deductions and credits as possible. However, it is also important to understand what happens if the IRS decides to audit a return. In an average year less than 1 percent of returns are selected for further scrutiny. In 2017, there were slightly more than 3,000 criminal cases according to an annual report from the Criminal Investigation Division.

Reducing the odds of an IRS audit

The odds of a Maryland resident being audited are relatively low. According to the IRS, only .7 percent of returns were selected for review in 2015. However, there are steps that one could take to help further reduce the risk of coming under IRS scrutiny. It is important to note that there is no way to eliminate the risk of an audit as some returns are selected randomly for review.

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