IRS Audit Risk

IRS Audit Risk

By Bobbi Yeo, Canon for Administration and Finance

If you’ve ever worried about being selected for a tax audit, you will be happy to know that the IRS examined only 1% of all 2008 individual income tax returns during 2009. Most examinations were conducted via correspondence. Very few individual income tax returns filed resulted in a face-to-face interview.

A number of factors could increase your chance of being audited. For instance, your return may be flagged if you report unusually large itemized deductions in any given year, or if individual deductions exceed ranges established by the IRS. Moving or education expenses may also be a red flag.

Risk of an IRS audit increases substantially for those reporting zero adjusted gross income and is somewhat higher for those reporting more than $200,000 AGI.

Another high risk group is independent contractors filing only one or two 1099s. True independent contractors would be expected to have more than one or two clients or customers. Therefore, this group may be audited in order to determine if they should have been classed as employees.  If that determination is made, it could lead back to you as the employer. This is something to bear in mind as you determine whether or not to pay the groundskeeper as an independent contractor or an employee.

Information gathered from: “2011 Church & Clergy Tax Guide” by Richard R. Hammar, J.D., LL.M., CPA

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