How to avoid Income Tax Audit (scrutiny)
A US Tax payer has come up with a great revelation that his chances of being audited (= our scrutiny) by US IRS is just 1% if he follows one simple rule – show an income of less than 200,000 dollars. Then the chances of audit are just 1%. If you show an income of more than 200,000 dollars, the chances of Audit triple to 3%.
Chances of Audit increases if:-
++ You have large amounts of itemized deductions on your tax return that exceed IRS targets.
++ You claim tax shelter investment losses on your tax return.
++ You have complex investment or business expenses on your tax return.
++ You own or work in a business which receives cash and/or tips in the ordinary course of business.
++ Your business expenses are large in relation to your income on your tax return.
++ You have rental expenses on your tax return.
++ A prior IRS audit resulted in a tax deficiency.
++ You have complex tax transactions without explanations on your tax return.
++ You are a shareholder or partner in an audited partnership or corporation.
++ You claim large cash contributions to charities in relation to your income on your tax return. An informant has given information to the IRS.
Wish we had some such tips on Indian Income Tax!