Since its incorporation as a city in 1921, Torrance, California has offered a safe and prosperous community for generations. With it’s motto and focus on building “A Balanced City” Torrance has invested heavily into parks, trees, and green space for its residents. This investment into amenities is, in part, possible because of the city’s prosperous residents and light high-tech industries. Honda, Toyota, and other companies have made Torrence their corporate base in the U.S. In fact, Torrance has the highest concentration of Japanese companies in all of the U.S. Torrance is one of the safest cities in the Los Angeles metro area and is recognized universally as an extremely desirable place to live.
Aside from the ample economic opportunity and moderate climate, Torrance also offers many cultural landmarks and destinations. The Del Amo Fashion Center is one of the largest malls in the United States. The Torrance Cultural Arts Center is the site for cultural events and expositions throughout the year. Furthermore a wealth of parks including Wilson Park, Columbia Park, and the Madrona Marsh Wildlife Preserve & Nature Center all provide places for residents of the city to unwind and relax.
Torrance Residents May Face an Increased Tax Audit Risk
Most people strive to live in a prosperous and safe area. Unfortunately a 2013 study administered by the National Taxpayer Advocate used confidential IRS data to determine that not everyone faces the same risk of a tax audit. That is, there are clusters of tax enforcement activity located in prosperous areas located near major metropolitan areas like L.A. While it is not clear exactly how much the IRS’ attempts to maximize return on an audit affects a taxpayer’s audit risk small business owners, those with foreign assets, and others subject to harsh penalties for non-compliance would be wise to seek a compliance review by an experienced tax professional.
What Are Common Reasons to trigger a Tax Audit?
There are many reasons why a taxpayer can face an audit, but some reasons are more common than others. In any case. Some common reasons behind a tax audit include:
- Failure to include all sources of income – Taxpayers must report and pay taxes on all income including income that was earned in a foreign nation or jurisdiction. When taxpayers fail to report and pay taxes on W-2 employment income, 1099 independent contractor income, and other sources of income they increase the chances of a tax audit or tax investigation and open themselves up to harsh penalties for failure to file, failure to pay, and potential tax evasion charges.
- Failure to provide accurate information – Some taxpayers believe that the IRS won’t notice or won’t care if you take some liberties with the numbers. Therefore while operating under this mistaken belief they may round numbers or work only in whole numbers to make the math easier. Regardless of the reason or reasons for the inaccuracies, the IRS does verify the information you submit and may decide to audit a taxpayer if the numbers are inaccurate.
- You made implausible deductions or claimed excessive expenses – Since the IRS administers and enforces the Tax Code for the entirety of the United States, the agency is privy to a wealth of statistical data. However, some claims by taxpayers are so implausible that statistical data is hardly necessary to flag them. For instance a person claiming $20,000 in business expenses to earn $30,000 in employment income would certainly throw red flags. Likewise, a person who claims an excessively large charitable donation for his or her income level would also likely attract attention.
- Failure to disclose offshore accounts – FBAR and FATCA have made nondisclosure of offshore tax issues a major enforcement focus for the IRS. Failure to disclose offshore accounts and assets can lead to criminal and civil tax consequences.
- Payroll tax issues – Business must assess, hold, and pay over employment taxes to the U.S. government. Payroll tax fraud has also been announced as a major area of focus for the DOJ and IRS.
In short, there are many reasons a tax audit can be ordered, however except for the random audit, most reasons for triggering an audit have to due with some lack of clarity or other tax error.
Rely on Our Tax Law Firm for Tax Help in Torrance
If you are facing a tax audit, call our office today for assistance or guidance. Likewise, if you have concerns about FBAR, unfiled taxes, FATCA, unpaid taxes, or payroll taxes the Hoffman Law Offices may be able to reduce or eliminate the penalties you face. To see how the Hoffman Law Offices can work to resolve your tax problems call us at 800-897-3915 or contact us online.