If you are wondering if doing a specific planning item will increase your audit risk, or if you’ve wondered how audit selection works, we can break this down for you,.
With every business return that gets filed, there is a specific 6 digit code that is included based on the industry you are in.
Once filing season is over, the IRS then pulls all the returns for that code and compares them. Any returns that have specific expense items way outside the average get pulled for audit. This is why, when a professional prepares your return, they should be looking at each line item for reasonableness in your specific industry.
So whether you get selected for audit or not really depends on how you structure your expenses and tax return filing, not necessarily if you take action on a tax planning strategy.
If you learned something new from this post or have specific questions regarding your tax return(s), leave a comment below and click here to speak with our team of tax professionals at Potter & LaMarca.