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When you are being audited by the IRS, tax auditors will go through many things in your tax records. The process of an audit can be one of the most trying times in your life. They will verify and re-verify everything that you have reported to them in the last few years. If there are any discrepancies in what you report and what the truth is, you may have a big tax bill waiting on you. Here are a few common discrepancies that tax auditors will look for during an audit.
1. Deduct Personal Expenses for Business
If you have your own business, there is a good chance that you have at some point deducted a personal expense on your business taxes. If this is the case, they will do everything that they can to prove it. If they can prove it, you will lose your deduction.
2. Income Does Not Match Lifestyle
If you reported $30,000 worth of income last year, but you live in a six bedroom house with a Ferrari in the driveway, there is a good chance that the auditor will try to dig deeper. They will want to see where the large discrepancy comes from.
3. Business Account Activity
They will pull your personal business account transaction log and make sure that it matches up with your deductions. Your personal accounts can even be pulled if necessary.
