Jackson Hewitt Shares Individual Scenarios that Can Trigger a Tax Return Audit

By: Jackson Hewitt Tax Service | 8 Shares 76 Reads

PARSIPPANY, N.J. – (March 26, 2013) – Tax return audits are one of the hottest topics each tax season – and one of the biggest concerns of many taxpayers. To help consumers better understand items on their tax return that could increase their risk of being audited, Jackson Hewitt Tax Service® is sharing certain scenarios the IRS closely monitors for tax fraud. Taxpayers, especially those who have claims in the areas listed below, should be prepared to provide the IRS with documentation to support their claims should the IRS audit their return. Jackson Hewitt® tax preparers in offices across the country are available to assist taxpayers with audit questions or concerns, even if Jackson Hewitt did not prepare the return in question.

“The best way to audit-proof your return is to make sure everything in it is accurate and in the right place,” said Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. “There are different levels of IRS audits, and the most common is caused by tax return errors such as reporting income on the wrong line or form.”

However, individual returns can be flagged for review by computerized IRS screening, random sampling or an income document-matching program that compares the information in the tax return to information from the taxpayer’s bank, employer, W-2 and other tax documents. While the issues flagged by the document program are obvious triggers, there are other, more complex manners of choosing returns for audit.

The exact reasons the IRS analyzes a specific tax return are a closely-guarded secret. However, Steber and Jackson Hewitt® advise taxpayers to be aware of the following red flags:

Unusually large amounts of deductions claimed that seem unreasonable when compared to the number of deductions claimed on other tax returns with similar income, such as high charitable contributions or large expenses on rental property
A large number of dependent exemptions claimed by a head of household with low income
Unusually high deductions for casualty losses, home office expenses, and travel and entertainment expenses
Significant nontaxable investment income, foreign source income or business losses
Self-employment income and no expenses, specifically when claiming the earned income tax credit

Steber notes that many audits can be handled quickly and easily with the taxpayer providing some additional information. The most important thing to do after receiving an audit notice from the IRS is to acknowledge it and respond promptly.

“Even if you did the tax return yourself, contact a tax professional before sending information or additional money to the IRS,” Steber cautioned. “The IRS does not necessarily have all the information they need, so there may be an error in the amount they state you owe. Your preparer can help determine what to do and locate the information needed to respond.”

Additional information on audits and guidance on what to do when being audited is available in the IRS Audits section of JacksonHewitt.com.

About Jackson Hewitt Tax Service Inc.

Jackson Hewitt Tax Service Inc. is an industry-leading provider of full service individual federal and state income tax preparation, with 6,800 franchised and company-owned locations throughout the United States, including 2,800 located in Walmart stores nationwide, and more than 400 Sears stores in the United States and Puerto Rico for the 2013 tax season. Jackson Hewitt Tax Service® also offers an online tax preparation product at www.JacksonHewittOnline.com. For more information, or to locate your neighborhood Jackson Hewitt® office, visit www.JacksonHewitt.com or call 1-800-234-1040. Jackson Hewitt can also be found on Facebook and Twitter, or check out Jackson Hewitt's "On the Street" video series, hosted by Chief Tax Officer Mark Steber and available on YouTube at http://www.youtube.com/jacksonhewitt.

SOURCE Jackson Hewitt Tax Service Inc.

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