I talk a lot about the plethora of ways you can get into tricky situations with the IRS. My hope is always to reach someone who might need help navigating one of these challenges and get them back on solid ground.
But, I’m also acutely aware that there are Mount Vernon folks who read my messages and think “That would never happen to me…” If that’s you, let’s take a moment to reflect on some 2024 IRS trends that show why a little extra care with your taxes is always a good idea.
One thing is certain: the IRS doesn’t play around when it comes to paying your taxes and staying on the right side of the law.
Take for example their Criminal Investigation Unit (IRS-CI). In 2024, they uncovered 2.1 billion dollars in tax fraud. That was around 615 people getting sentenced to an average of 2 years jail time for tax crimes.
Though you’re not a criminal — just someone trying to earn a living, run a successful business, or set your family up with some financial security — that doesn’t mean you’re not vulnerable to getting into hot water. Unfortunately, it’s fully possible to commit a financial crime without even knowing it.
Take for example the fraudulent Employee Retention Credit (ERC) claims, with over 5.5 billion potentially claimed incorrectly. The IRS-CI unit initiated almost 500 investigations into false ERC claims last year, and at least 42 of them led to convictions.
Unfortunately, in many cases, honest business owners were convinced by ERC mills that they could capitalize on this credit when they weren’t actually eligible. And even if that was an honest mistake… the IRS is doubling down on reviewing ERC claims — and the consequences can range from penalties to repayment demands.
I bring these up not to make you feel threatened in your tax problems, but to actually help you see how the IRS is prioritizing things. You’ll most likely not be the focus of an IRS-CI investigation.
So, will you end up in the “likely to get audited” category in 2025? That’s a question I want to dig into as your trusted Westchester County tax advisor.
Well, the prime targets (based on 2024 numbers) are high-income earners, business owners, and those dealing with complex finances. But the IRS is also laser-focused on uncovering broader financial wrongdoing. This means increased scrutiny on areas like cryptocurrency transactions, offshore accounts, or fraudulent business practices.
There are a few red flags that would likely trigger an audit (or worse), and you’ll want to diligently check these against your current financial situation:
- Failing to report all your income. The IRS gets all the same 1099s and W-2s that you do, and they’ll cross-check your return against them. If you receive a 1099-NEC, 1099-K, or W-2 but don’t report it on your tax return, the IRS will notice because they match these forms with your reported income. For example, if you’re a freelancer and you receive a 1099-NEC for 50K but only report 30K in income, that’s a clear red flag.
- Earning a large income. The pattern continues… as you earn more, the likelihood of an IRS audit increases. Generally, the IRS targets individuals earning 500K or more at much higher rates than those earning below that threshold.
- Discrepancies between tax forms and reported income. If your employer reports a W-2 showing 80K, but you report only 60K, the IRS’s automated systems will flag the difference for review. Similarly, if a business files a 1099-K reporting 100K in credit card transactions, but you only report 70K in revenue, that discrepancy could lead to an audit.
- Excessive or false deductions. It’s not uncommon for business owners to blur the lines between business expenses and personal ones. Was that trip to Hawaii really business-related? The IRS holds data for the amount of travel typically required for each industry. If your travel expenses surpass the average, they’ll notice.
If you do hear from the IRS, don’t panic. Most issues are resolved without drama, but quick action is crucial. Whether it’s gathering documentation, clarifying your numbers, or crafting a response, I can guide you through the process. And if it goes further, I’m here to represent your interests and help protect your financial well-being.
The IRS-CI unit’s focus on compliance is a reminder to stay proactive about your taxes. Ensuring your filings are accurate, complete, and well-documented isn’t just good practice — it’s essential. If you’re unsure about your situation or want peace of mind, let’s work together to make sure everything is in order. You don’t have to face the IRS alone.
calendly.com/l-karam/prospect-schedule
In your corner,
Lynn Karam