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High-tech tools can trigger tax audits -- even without wrongdoing

Every year at this time, millions of Americans are preparing to submit a tax return to the Internal Revenue Service with the hope that everything will be processed as expected. The unfortunate reality is that well-intentioned people can receive a notice of audit from the IRS, rather than the refund check they were expecting.

In recent weeks, we've covered staffing shortages on IRS help lines, and how that could impact filers as they seek to meet deadlines and complete their filings accurately. The USA Today reports, however, that strains in parts of the IRS don't necessarily limit the agency's audit potential.

Rather than relying entirely on humans to process tax returns, the IRS uses sophisticated computer technology to analyze returns and detect certain "red flags" that could trigger an audit. Keeping this in mind, there are few things that taxpayers may want to avoid as they submit their returns to the IRS by the April 15 deadline:

  • Human error: Even if a person accidentally misstates his or her income due to a typo, inconsistencies between employer-submitted W-2 forms and self-reported income could set off an alarm
  • Income: Those who report negligible or high income (over $250,000) are quite often an automatic target for the IRS
  • Charitable contributions: If large donations are included in returns without proper documentation, an audit might be considered

In some cases these audit signals are unavoidable. For instance, people aren't going to inaccurately report their income simply because they are considered a high-income earner. At the same time, however, steps can be taken to avoid or address an audit, should it become a reality.

Above all, people should be able to enjoy their hard-earned tax refunds, as opposed to dealing with the stress of an audit.

Source: USA Today, "IRS red flags: How to avoid a tax audit," Jeff Reeves, March 15, 2014

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