From now until filing day on April 17, The Examiner?s Business section will feature a tax tip of the day based on questions frequently asked of the IRS and local accountants.
Q What can trigger an audit? Are there any audit defenses?
A An audit involves the IRS examining financial documents and receipts, said Al Giovetti, a certified public accountant who passed the enrolled agents exam of the IRS and is state director of the Maryland Society of Accountants.
He said 99 percent of audits are a verification of records.
Things that trigger an audit, such as large refunds, are on a “hot list,” Giovetti said.
Someone can report you, or if your preparer is labeled as suspicious by the IRS, all its clients can be audited, he said.
Audits can also result from taking excessive deductions or reporting different amounts on tax returns than 1099 forms, said Bob Jazwinski, a certified public accountant, personal financial specialist and volunteer with the American Institute of CPAs.
Forgetting to include income items received from banks or brokerage firms is also a common mistake, he said.
Both agreed that keeping documents is essential.
The IRS can audit the present year?s finances as well as those for three prior years, Jazwinski said.
“If you do get audited, you need the supporting records to prove your income and deductions,” Jazwinski said.
“I think the most important thing people can do is know what records they need to keep and how to keep them,” Giovetti said. “The only excuses for losing records are floods or fire ? the dog can?t eat them.”
