Prudent taxpayers naturally want to minimize their chances of an IRS tax audit. That is why, in March of this year, we devoted a three-part series of posts to some of the leading red flags that an audit may occur. This series covered such items as unusual tax deductions and failure to report miscellaneous income. It is also generally known that the chances of being audited rise with income.
The imagery of carrots and sticks is of course not literal. It dates to a time when horses, not motor vehicles, powered human commerce and culture. But we also know what the imagery implies. Carrots are supposed to provide incentives while sticks entail consequences.
The IRS continues to take a public relations beating. It's only been about six weeks since the revelation that the agency had selectively subjected certain political groups for heightened scrutiny of their applications for tax-exempt status.
If you are reading this blog, chances are you are already somewhat familiar with the veritable alphabet soup of abbreviations involved in offshore account compliance. As we discussed in our April 19 post, abbreviations abound in this area of tax law.
The tables have been turned at the IRS. The agency responsible for scrutinizing taxpayers' compliance with the tax code has itself come in for sharp scrutiny. This week came the news that an audit of the agency responsible for federal tax audits has found some highly questionable spending.
In the last few years, the IRS has offered two well publicized amnesty programs for the disclosure of offshore accounts. Many taxpayers have participated in these voluntary disclosure initiatives, seeking to avoid potential tax evasion charges.
One of this year's hit movies was called Silver Linings Playbook. The story follows the craziness of falling love, with the added plot test of a leading character who is struggling to overcome a mental health issue.
We've naturally been paying close attention to the story of how federal budget cuts will affect the IRS. When we last wrote about it, on March 4, the word was that the IRS intended to delay furloughs of employees until after the April 15 income tax filing deadline. Furloughs are essentially mandatory, unpaid vacation days that are used to implement cuts in agency budgets.
Large bureaucratic agencies are seldom known for their vivid prose. The IRS is no exception.
No one knows exactly what Google's famous algorithm is. Nor does anyone outside the IRS know exactly what triggers a tax audit. But based on experience, it is possible to make certain educated assumptions about what the warning flags for IRS audits are.