Chances of an IRS Audit Due to Filing a Status Change
The Internal Revenue Service (IRS) audits selected tax returns each year. During an audit, you must provide evidence that your claimed income and deductions are correct. While the IRS reserves the right to audit any tax return for any reason, it is more likely to audit returns that fall into certain categories.
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Factors Making Audit More Likely
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Status changes are not on the list of factors making an audit more likely, according to both wwwebtax.com and IRS Audit Process. Taxpayers who claim an unusually high income, who take deductions that are widely abused such as the Home Office Deduction and who are self-employed or run a business at a loss are more likely to be audited
Which Filing Status Should I Choose?
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The IRS allows you to choose the filing status that will get you the lowest tax rate if you qualify for more than one status. Commonly, single parents have the option of filing as single or as head of household. Head of household is often the better option of the two, especially for lower-income individuals. Similarly, a person whose spouse is deceased may choose to file as widowed rather than as single in the two years following his partner's death.
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Considerations
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If you are filing a joint tax return with your spouse, you both may get involved with an audit. For example, if your spouse is self-employed or runs a business at a loss, he may be more likely to be audited than other taxpayers. The auditor will examine your tax records along with your spouse's should an audit occur. If you file separately, however, only your spouse will be audited. Your tax rate will be higher if you choose this option.
Best Practices to Avoid an Audit
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You and your spouse should make sure you understand deduction rules before taking any deduction. This is especially important if either of you owns a business or is self-employed. Only take a deduction if you can prove that you qualify for it. For example, do not take a home office deduction unless you have a room set aside only for business in your home, and do not take more than the allowable deduction. If you have any doubts about any deduction, consult a tax professional or attorney before taking it.
My Spouse and I Got Audited--Now What?
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It is important not to panic if you are audited. Although the IRS makes adjustments to 75 percent of audited returns, according to Nolo.com, if you have documentation for everything you claimed you will likely get through the audit unscathed. If your spouse is being audited, it is too late to change your status from filing jointly to filing separately, plus doing so would result in you owing more taxes, so just give her as much support as you can during the audit process.
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