Tax payers on whom IRS is keeping a close watch this year

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By: Good Nelly
on 25th Mar,2011

IRS reviews the tax returns of some consumers or businesses more minutely than the others.
Tax payers on whom IRS is keeping a close watch this year


IRS reviews the tax returns of some consumers or businesses more minutely than the others. They make a random selection of some tax returns and check whether all the information has been reported correctly. IRS selects the tax returns for inspection through a special formula called Discrimination Function. In spite of that, there are some taxpayers on whom IRS keeps a close watch every year. These payers have a higher chance of being audited than the other tax filers. Read on to know about the taxpayers who are most likely to be audited by the IRS in the year 2011.  

Tax payers on whom IRS is keeping a close watch

Check out the tax payers on whom IRS is going to keep a close watch this year:

Tax payers who are self-employed: If you are a self-employed person and submit Schedule C or E form, then you are likely to be audited by IRS in 2011. This is because a lot of taxpayers manipulate the figures to claim maximum deductions. There are many taxpayers who report more losses than they have actually incurred in a given year to lower their taxable income. IRS is going to scrutinize the income, losses etc. of the sel-employed persons very minutely in 2011.

Tax payers who have small businesses: Usually, IRS keeps a close watch on the small business owners such as shopkeepers, florists, contractors, etc. There is a valid reason for that. Several small business owners are not aware of the tax return rules and guidelines correctly and submit wrong forms. Others deliberately manipulate the facts and figures to get tax deductions. IRS especially reviews the tax returns of the new small business owners as they tend to make more mistakes.  

Tax payers who do private transactions: Taxpayers who are involved in the real estate transactions make a huge amount of money. The tax payers who hold interest in investment properties potentially earn a lot of profits every year. This is why the IRS examines their files thoroughly to check whether the tax payers have shown less profit in their tax returns.     

Taxpayers submitting Schedule A form: Taxpayers who are enclosing Schedule A form with their 1040 are likely to be inspected by the IRS more than the others. The reason is, there is a greater probability of fraud or mistakes on the part of taxpayer doing additional calculations.  

Some of the business enterprises such as hotels, cleaning agencies, casinos, etc. make all the financial transactions in cash. It has been seen over the years that these enterprises drastically reduce their income amount in their tax returns as it is quite hard for them to prove their revenue earned through various transactions. This explains why underworld organizations have been associated with these enterprises for several years. IRS scrutinizes the tax returns of the small business enterprises to prevent tax fraud.

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