July 25, 2008, Newsletter Issue #73: High Risk Trigger Areas

Tip of the Week

The IRS has noticed recently that there are certain industries (areas) which are known for abuse of the tax laws. Therefore, the efforts to scrutinize these tax areas have been increased. These areas are known as high risk (non-compliance) audit trigger areas.

If you file a tax return, and are involved in any of the following categories, be on your guard for a possible audit.

Schedule C (sole proprietors) filers. This is perhaps the largest scrutinized area regarding IRS tax returns. A recent study by the IRS found that Schedule C filers are known for not reporting income. Also, there are many chances to claim incorrect deductions in this category.

Partnerships S-Corporations Abuse tax shelters. This is an illegal activity that has shown recent growth.

Corporations – in general. Corporations are known for tax loopholes. More recently, shareholder fraud has become too popular.

High-income individuals, non-filers. Taxpayers with more money can, naturally, find creative ways to move it around.

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