The Truth about Tax Audits: what triggers them and how to prepare
- Dr. Clifford J. Frank
- May 7
- 1 min read
A tax audit can be a stressful and time-consuming process, but understanding what triggers an audit and how to prepare can significantly reduce risks.
Common Triggers for Tax Audits
High-Income Discrepancies – Significant inconsistencies between reported income and financial transactions raise red flags.
Unusual Deductions or Expenses – Large or out-of-pattern deductions compared to industry norms can invite scrutiny.
Cash Transactions – Businesses handling large cash transactions, such as restaurants or retail, face higher audit risks.
Foreign Accounts and Offshore Holdings – Undisclosed foreign assets or improper use of offshore structures attract tax authorities.
Frequent Loss Reporting – Regularly reporting business losses may signal improper deductions or underreported income.
Steps to Reduce the Risk of Being Audited
Ensure Accurate and Complete Reporting – Always report income truthfully and match figures with bank statements.
Keep Detailed Records – Maintain invoices, receipts, and documentation to substantiate deductions and business expenses.
Use Professional Tax Planning – Engage tax professionals to structure your finances efficiently and ensure compliance.
Avoid Round Figures and Guesswork – Rounded numbers can appear suspicious, so base calculations on actual expenses.
File on Time and Correctly – Late filings and errors in returns can increase audit probability.
We at LEXeFISCAL can assist you in optimising your global tax strategy, ensuring compliance, and unlocking the full potential of your international investments.
Contact us today:
📩 Email: info@lexefiscal.com
📞 Tel: +44 (0)208 092 2111
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