Why you get audited by the IRS and how you could prevent it from happening
NEW BERN, Craven County — Extra attention can sometimes be a good thing, unless it comes from IRS auditors. While the chances of getting audited are low, there are things in your return that could spark a red flag.
Some memories can fade overtime, but for Randy Alexander, his run-in with IRS auditors is not one of them.
"I went from a $1,200 refund to $6,000 in debt," Alexander said.
A simple letter in the mail -- it said something in Randy's tax returns didn't add up and it started months of trying to clear things up with the IRS.
"Through April, through May, through June, through July -- it was October before I got it resolved," Alexander said. When he finally got a hold of the right person, it turned out to be a simple error.
According to Forbes, fewer than one percent of tax returns were audited in 2016, but there are factors that could put a target on your back, such as income level, the types of deductions or losses you claim, the business you're engaged in and whether you own foreign assets.
For example, if you make more than $200,000 a year, you have a higher chance of getting audited. You must report all 1099s and W-2s, even if you believe them to be incorrect.
You could also be flagged if you deduct unreimbursed business expenses, which are only deductible beyond two percent of your adjusted gross income. If you're claiming a home office deduction, you'll need to prove the area is separate and exclusive for business use. If you give a lot of money to charity, the IRS will question if you're claiming too much.
These days, Alexander is like an expert in taxes. His wife, Gayle George, is co-owner of Fastax in New Bern, creating a support system not only at home, but also at work. He now works alongside his wife as an enrolled agent.
"What hooked me in is learning how to represent folks in front of the IRS, that's what really hooked me because I've kind of been down that road where I didn't have that representation," Alexander said.
"I think that gives him a foot up because he can actually understand how people feel when they walk through the door if they've got one of those letters in hand," George said.
Tax experts like Alexander and George said the best way to avoid a long drawn-out audit process is to make sure you report all of your income and have the documents to back it up. It's also smart to consider using an expert when filing.