Salt Lake City Tax Attorneys Assist Utah Residents and Business Owners With an IRS or State Tax Audit
Helping you keep your cool when you’re being audited
In 2013, it was reported that your overall chance of being audited by the Internal Revenue Service (IRS) is approximately 1 percent unless you’re making $5–10 million, in which case it’s 18 percent, or more than $10 million, in which case it’s 27 percent. If you are one of the unlucky winners of this “reverse lotto,” look to our legal team at Huntsman | Lofgran for help. We regularly counsel and represent Utah residents and business executives who are compelled to navigate IRS and Utah State Tax Commission audits — and we are successful more often than not, in helping taxpayers mitigate their liabilities and return to currency.
What triggers an IRS tax audit?
Of course, having a high income isn’t the only factor that can increase your chances of being audited. Indeed, the following may set off red flags for government scrutiny:
- Large itemized deductions — If your itemized tax deductions exceed the target range set by the IRS for people at your income level, this could bring you under scrutiny.
- Home offices — If part of your home that you deduct as a business expense doubles as your child’s playroom, your deduction most likely is going to be disallowed.
- Missing investment income — When filing, don’t forget to include the year-end IRS Form 1099 that financial services companies send to you summarizing your interest and dividends earned for the year.
- Incomplete returns — If your return omits some material, the IRS may wonder what else was omitted.
- Business losses — Keep your expenses legitimate. The IRS is not fond of a “business” that’s really a hobby.
- Charitable deductions — Keep a record of all contributions you make, and obtain a written acknowledgement from a charity when you donate more than $250. If you’re donating property valued at more than $5,000, it’s better to keep an expert appraisal handy.
- Medical expenses — If you’re younger than age 65, you can deduct medical expenses when they rise above 10 percent of your adjusted gross income. However do not include costs for over-the-counter medicine, health club dues or most cosmetic surgeries.
By the way, math errors may trigger an IRS inquiry, but they rarely lead to a full-blown examination.
What triggers a Utah State Tax Commission audit?
Utah’s Tax Commission maintains a staff of approximately 125 tax auditors, including specialists in income, sales, corporate, mining, severance, and miscellaneous taxes. You generally have 30 days in which to file an appeal against an audit assessment. State audit triggers very much follow along the same lines of the IRS audit triggers described above.
Helping multistate businesses determine their Utah nexus
The Utah State Tax Commission also assigns compliance auditors to investigate “nexus” — that is, to determine if there is cause for a multistate business to pay sales tax, income, franchise and other business taxes to the state of Utah. To date, state income tax nexus has been created when an out-of-state company derives income from sources within the state, owns or leases property in the state, or employs personnel who engage in activities that go beyond those “protected” under federal interstate commerce laws.
With our law firm standing by you, an audit doesn’t need to be the end of the world
Despite the fear they instill, audits are survivable. If you get audited, it’s important to retain a tax law firm that understands tax law on the local, county, state and federal levels, a firm that defends your rights and represents your best interests while setting your affairs straight with tax authorities. Call Huntsman | Lofgran today at 801.838.8900 to arrange for a free initial consultation, or contact us online.