Tax Audit Red Flag #1 – Your Ex Sends Letters to IRS

You’ve just become a member of an elite club. You’d think a hefty congratulations was in order. Think again. This membership isn’t elective or optional, and the dues can be much more than that prestigious country club you’ve been dying to join. Welcome to the IRS Audit club. Or not.There’s no reason to pay more than what the law requires when it comes to taxes. At the same time, however, you don’t want to go waving a big, bright red flag in front of the IRS either.The good news is that the average person isn’t the most likely to pique the interests of the IRS. The bad news is there are a number of triggers, including an ex-spouse contacting the IRS, that cause the friendly IRS agent to take a closer look at your return.

Revenge of the Ex
Divorces often get ugly. Sometimes so much so, that the ex is out for revenge. Some ex’s do so by going after your reputation – by way of the Internal Revenue Service. They do this through a “Dear IRS” letter with “You” as the subject.

All your ex needs to do to wave this red flag is write a seemingly credible letter to the IRS. It doesn’t even need to be your former spouse. Sometimes former in-laws, employees, and business partners are the ones who do the dirty deed.

In many cases, the allegations are completely false. Some claims have been of ex-spouses owning brothels, failing to report income, laundering money, and actively committing major financial crimes.

Regardless of the allegation though, these informants can cause the tax man to look at your return with a fine-toothed comb. This is just one more reason to seek a more amicable divorce to prevent red flag raising retaliatory letters to the IRS.

Be on the lookout for the next installment: Tax Audit Red Flag #2 – You Have Assets Overseas to learn more about what you can do to avoid involuntarily joining the IRS tax audit club.