Retired Georgia residents have to file their federal income tax returns just like people that are still in the workforce. The Internal Revenue Service wants to know about income from retirement account distributions, investments, rental properties and even gambling winnings. If retirees doe not fill out their tax form correctly or has income information that raises a red flag, their tax form could be singled out for an audit.
Though the chances of an IRS audit are very low for the general population, the chances go up significantly as a person’s income goes up. All individual tax returns have a .84 percent chance of being audited, but tax returns showing income over $200,000 have a 2.61 percent chance of being audited. If a retired person claims at least $1 million in income for the year, there is a one in 13 chance that it will be audited.
There are other factors besides high income that can make a retired person a target for IRS audit. If a retired person takes relatively high deductions compared to their income, this can raise a red flag. A person that is old enough to take the required minimum distributions from a retirement plan will be scrutinized by the IRS if they are not taken. Another red flag that the IRS looks for with retired taxpayers is an unreported foreign bank account.
A tax law attorney may be able to represent a retired person who has received an inquiry from the IRS. In many cases, questions from the IRS can be answered by mail. While helping a retired taxpayer to answer questions from the IRS, an attorney may also help the taxpayer to prepare for the possibility of a tax audit.