Are Those Making $200,000 More Likely For An Audit

Nobody wants to get an audit.   About 1 in 150 of us will experience some type of audit in our lifetime.   The good news is that if you follow these six smart money moves, you may be able reduce your chances of getting flagged in the future.

  1. You didn’t disclose all of your income
    • The IRS gets copies of your w-2’s, 1099’s (reporting of your interest and dividends), and capital gains and losses.  Make sure you collect all of your statements from work, investments, etc.
    • “Measure Twice Cut Once” whether you or your accountant does the math.
  2. You have a big mouth
    • Never brag (especially on social media) that you pulled a fast one on the IRS.
    • The IRS does more trolling today than ever before on social websites such as Facebook, Twitter, etc.
    • Whistleblowers can earn some significant rewards (15% to 30% by filing form 211) by turning in cheats.  Be very careful of ex-girlfriends, ex-spouses, etc.
  3. The dreaded home office deduction
    • This has been a long standing IRS red flag item.
    • The IRS recently created a limited safe harbor that allows taxpayers to take a deduction of $5 per square foot up to 300 square feet.
    • Remember to ask yourself whether an office is being provided for you by your employer even if you work a good amount out of the home.
  4. You have an unincorporated business (Schedule C Sole Proprietor)
    • Anytime you get 1099 income during the course of the year, you are in a sense a de facto corporation as a sole proprietor.
    • Your business could be a hobby if you don’t turn a profit over three of the last five years. You could have your deductions disallowed if the IRS declares the business a hobby.
  5. You make too much money   Most people believe you get targeted from the IRS when you make more money.  Especially business owners that have an LLC or an S Corporation. Here are the odds.
    • Those making over $200,000 approximately 1 in 30
    • Those making $1,000,000 to $5,000,000 approx. 1 in 10
    • Those making $5,000,000 to $10,000,000 approx. 1 in 5
    • Those making $10,000,000 and above approx. 1 in 3
  6. You were too charitable
    • Higher risk when you take above $500 non-cash
    • Be sure you file form 8283 and have very clear documentation
    • A good website to use is www.satruck.com to look at valuations of basic items.

Since part of the auditing process is highly randomized, you may not be able to avoid an audit.  Using these tips can help shrink your risk!

Written by: Ted Jenkin

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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves


My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

Read More About Ted Here

Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

Background and qualification information is available at FINRA's BrokerCheck website.

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