Now that you’ve filed your taxes and may have even cashed a refund check, the audit worries can be over for this year. But for those of you who have not heard back, or have received an IRS letter in the mail, an audit could be in the works. In the first of what we hope to be many tips from your Houston bookkeeper and accountant, we wanted to share a little more on audits.
Accounting Faux Pas
One of the most common ways to trigger an audit is the failure to report an income from an unknown or un-remembered source that was reported by that party to the IRS. 
This includes income from employers current and past, banks, and can include items on form W-2 or a 1099. The IRS uses a process to run all returns and compares information on income to see if they match. If the numbers don’t match, chances are you’ll get a letter with a recalculation of the tax owed as well as any interest or penalties you’ve incurred.
Accounting and Audits
If the inconsistency is due to a bookkeeping or accounting error, there isn’t much you can do but accept the audit and pay your way out of it. However, if the income reported is inaccurate, things can get tricky, as the IRS will usually side with whoever says the money goes to them. If you decide to fight, you should go to a local accountant or bookkeeper to see what your options are. If the amount is large enough, you may also need the services of a tax attorney.
Audit Tidbits
Not to worry, though. Out of the millions of individual tax returns the IRS gets, only 1.1 percent of all of them are flagged for audit. Other common reasons returns are sent back are due to simple bookkeeping or accounting errors such as incorrect address, misspelled name, or a digit off in the Social Security number.
And as always, if filing your taxes or keeping up with the books is putting you in danger of an audit, please feel free to contact your Houston bookkeeper and accounting firm at 281-894-6494.