What Is Reasonable Cause For IRS Audits

One of the most pressing questions when it comes to taxes, and how to avoid paying as much of them as possible, is wondering what qualifies as reasonable cause for an IRS audit. Of course, there is no iron-clad answer to this question. If there was, we would all be filing our taxes a certain way and no one would be paying tax on anything. Even with the dramatically changing tax code, there are certain things that will cause a red flag more times than not. It only takes a few red flags for things to get very dicey, very quickly. Here are just a few things that often spark reasonable cause for IRS audits.

Generally speaking, red flags are all about deductions. We all have deductions when it comes to our tax returns. If you are self-employed, you may have hundreds of deductions. If you have a regular office job, but you have a home and a few kids, you likely have a dozen or so deductions, or possibly more. It is inaccurate to say that most deductions cause a red flag, only a few do and the key is finding out what those deductions are and how to avoid their pitfalls. The first one we’ll look at involves charitable donations or donations to political parties. We all know that charitable donations are a great tax write-off, but the government will look at how much you are trying to write off in comparison to how much money you make per year. If your donations seem oddly out of line with your income, you will trigger a red flag in a heartbeat. The logic here is that most people don’t donate large amounts of money to charity or to political parties if they, themselves, don’t make a lot of money.

According to IRS agents who are no longer with the bureau, many returns get flagged if you signal that you have a large number of dependents. Of course, there are families that have 12 kids, but that is a little atypical. You may want to be careful telling the IRS how many dependents you really have if you don’t actually have a large family. You may create reasonable cause for IRS audits by deducting things that don’t actually apply to the business you are in. Every small business owner out there deducts things that are “iffy” when it comes to how much they actually apply to your day-to-day business dealings, but it is important that you don’t get carried away. We all want to pay the least amount in taxes possible, but there are so many things that set off a reasonable cause for IRS audits, you simply can’t push the limits too much.

One final note: if you are audited, don’t try to talk your way out of it. The IRS employs some very sharp minds that have been trained to look for flimsy excuses. You may end up talking your way right out of a chance to settle things amicably. 

A nationally recognized Attorney whose practice focuses on representing clients across the United States with IRS Problems. He is AV rated by Martindale-Hubbel and is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. He has been honored by a listing in Martindale-Hubbel's Bar Register of Preeminent Lawyers. His passion is providing IRS help to taxpayers with both individual and payroll tax problems. He teaches attorneys, CPAs and Enrolled Agents in the finer aspects of IRS representation all around the United States. Visit his website at http://www.getIRShelp.com.