STUDIO CITY (CBSLA.com) — There is one customer at Joe Miceli’s restaurant in Studio City he says he must always keep happy: the IRS.
“If we were to get audited, the accountants have told me it’s a nightmare,” Miceli, the restaurant owner, said.
But as CBS2’s Peter Daut reports, there are a number of red flags the government agency looks for on a tax return that can increase one’s chance of getting audited.
“People need to be careful,” said Los Angeles CPA Elisha Wiesenberg.
Wiesenberg said a person is more likely to get audited if something is out of proportion, such as a large charitable deduction that does not match one’s income level.
“Stuff where it just doesn’t fit in, the IRS finds fast,” Wiesenberg said.
Income also plays a factor.
Tax experts say there is a one in 37 chance a person making $200,000 a year will be audited. The odds jump to one in 13 for millionaires.
That’s because the more a person makes, the more deductions they’re likely to take and the more the IRS can zero-in on.
“Sometimes people will apply for benefits or credits that they’re not necessarily entitled to,” said Patricia Svarnas, an IRS media spokesperson.
Applying for tax credits on things like continuing education, retirement contributions, or energy-efficient home improvements may also draw the attention of auditors.
“You also want to be careful of your allowable deductions. Make sure you don’t include all kinds of deductions that don’t make sense for your profession,” Svarnas said. For example, don’t deduct expensive outerwear when you have a desk job or write off a cellphone your employer is paying for.
The use of round numbers is another red flag.
“That screams out ‘I’m estimating and I’m not using a real expense,” Wiesenberg said.
Miceli says he’s never been audited and hopes to keep it that way by saving all his documents and receipts.
“Seven years worth of paperwork. Everything the accountants give us. Everything that we run through our computers. You have to save it,” he said.