KHN – The Internal Revenue Service (IRS) has already begun to collect returns and even provide the associated refunds as the U.S. tax season gets underway. However, some individuals may be subject to an investigation by the tax body if they submit the paperwork with a specific error. This issue pertains to how the revenue figures for 2024 are stated, which could cause concerns and prompt a thorough investigation.
The IRS is Investigating Thousands of People for Doing This on Their Tax Returns
In certain situations, using approximations and round numbers on tax returns may lead to an investigation. Any over-approximation could arouse concerns because amounts on forms, like the 1040, are typically not exact values in multiples of 100. Instead of rounding to higher values, it is advised that taxpayers be precise in their computations and round only to the closest dollar. For instance, a photographer should round to $495 rather than $500 if they record a lens purchase of $495.25 as a business expense. The IRS could ask for more proof if the amount is precise, like $500.
What should Americans do if they receive an audit letter from the IRS?
If the IRS sends you an audit notice, you should act quickly and take the following steps:
- Read the letter attentively to determine the cause of the audit.
- Collect all documentation that supports the information reported.
- For advice, speak with an accountant or tax representative.
- Respond within the specified deadline to avoid further penalties.
In certain situations, the tax collector might accept justifications and supporting documentation without requiring the return to be modified. Meeting deadlines and maintaining well-organized records can help the audit process go more smoothly.
How much time does the IRS have to audit a return?
The IRS generally audits returns for the last three years, although if a significant error is detected, it can extend back as far as six years. Most audits are conducted on returns from the last two years. If an audit is not resolved within the period established by law, an extension of the statute of limitations may be requested. This allows the taxpayer to submit further documentation, appeal the results, or request additional refunds.
You better watch your bank account, because you might be under the IRS radar
The Internal Revenue Service (IRS) may investigate any individual who puts more than this sum into their bank accounts. While deposits of more than $10,000 in cash are not illegal, the IRS and FinCEN closely monitor these transactions to prevent financial corruption. If you deposit more than $10,000 in cash into your bank account, the IRS may start looking into where the money came from. The Bank Secrecy Act of 1970 is to blame for this, as it mandates that banks tell the federal government every time a customer deposits or withdraws that sum within 24 hours.
Money laundering and tax evasion are among the offenses that the rule aims to stop. When you make a cash deposit of more than USD 10,000, the bank is obligated to submit a Cash Transaction Report (CTR) to the Financial Crimes Enforcement Network (FinCEN). This report includes vital information, such as:
- Full name of the account holder
- Registered Address:
- Social Security Number
- Driver’s license number (if appropriate)
- Date, amount, and kind of transaction conducted
In addition, bank personnel must verify your identity, although they are not required to inform you that they are sending a report to the government. They may even ask you questions about the origin of the money. Although it is not mandatory to answer, it is recommended to be honest to avoid suspicion.