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.
Those who don’t report any income may also be subject to scrutiny by the IRS. The government is also on the lookout for those who don’t claim enough income to meet their standards of living. For instance, someone who claims to have made $50,000 generally won’t be able to buy a new boat or expensive car.
Business owners may generally deduct reasonable and ordinary expenses from income generated in a given year. The IRS states that a business is an activity that has a reasonable expectation of a profit. Those who participate in an activity as a hobby generally cannot deduct expenses that they incur. Furthermore, business owners who have a Schedule C may be asked to verify their deductions. This is especially true if they take the Earned Income Tax Credit (EITC).
A taxpayer error might result in a return being audited by the IRS. If a person is audited, they may want to speak with an attorney. A lawyer could help an individual understand why the audit occurred and what information the government needs. Taxpayers may elect to have their attorneys represent them in negotiations with the IRS. This could increase the odds of receiving a favorable outcome.