Red Flags the IRS Will Be Looking for on 2019 Tax Returns
As a seasoned SEO expert at Google, conducting a thorough analysis of tax return submissions is crucial to ensure accuracy and compliance. This article will highlight specific red flags that may trigger an IRS audit or in-depth review on 2019 tax returns. These flags are essential to be aware of to avoid unnecessary scrutiny and potential complications.
Understanding the Red Flags
The Internal Revenue Service (IRS) employs various strategies to ensure tax compliance, and part of this involves identifying specific red flags that may indicate potential issues. Here, we delve into the common red flags and explain how they can affect your tax return:
New Provisions: Child Tax Credit and Legal Residence
One of the notable changes in tax regulations during 2019 surrounded the Child Tax Credit. For individuals claiming the child tax credit, it is critical to ensure the child is a legal resident with a valid permanent residence permit and a Social Security card. The Social Security card is particularly important, as it must state acceptable for employment even if the child is underage. If the card states not legal for employment, the child is not eligible for the credit. It's important to note that if no additional information is printed on the card, the child is still eligible to claim the credit, provided they otherwise meet the qualifications.
However, if the child's Social Security situation has changed, but the old card still includes the legend: before the filing date, a new card without this label must be obtained. This ensures that all necessary documentation is up-to-date and compliant with current tax regulations.
Common Red Flags for 2019 Tax Returns
While the IRS has been understaffed due to recent governmental actions, the potential for audits is still prevalent. Regardless of the overall numbers, several situations may trigger an in-depth review or audit. Some common red flags include:
Self-Employed Individuals with Perfect Numbers for EITC, CTC, and ACTC
Self-employed taxpayers who hit the 'sweet spot' for the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and Additional Child Tax Credit (ACTC) should be wary. If these numbers appear too perfect, it may raise suspicion. This is because the credits are frequently misspelled or improperly calculated, which may indicate an attempt at fraud.
Lack of Documentation for Educational Credits
The presence of educational credits often raises questions if the 1098-T form is not submitted. If this form is missing, it may trigger a second look by the IRS. This form provides crucial information about tuition and fees paid by the taxpayer or their dependent, which is necessary for claiming these credits.
Claiming Step Children and Self-Employed Taxpayers with Minimal Expenses
Claiming a step child without supporting documentation can be a red flag, as the IRS may question the legitimacy of the claim. Additionally, self-employed taxpayers who report little to no expenses on their tax returns may be scrutinized more closely. This scenario raises questions about their claim of legitimacy as a business entity and can lead to further examination.
Strategies to Avoid Audit Triggers
To minimize the risk of triggering an audit or in-depth review, it's essential to keep meticulous records and ensure all documentation is correct and up-to-date. Regularly reviewing and organizing tax documents can help identify and correct any potential issues before submission. Utilizing tax preparation software or consulting with a tax professional can also provide additional peace of mind and compliance assurance.
As the IRS continues to adapt to changing tax laws and regulations, it's crucial for tax filers to stay informed. By understanding the common red flags and taking appropriate precautions, taxpayers can submit accurate and compliant tax returns and avoid unnecessary scrutiny.
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