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Tax Audit

What is a tax audit?

A tax audit is a procedure used by the IRS to conduct a thorough inspection of a taxpayer's tax return.  The most important thing an airline flight crewmember can do to prevent a tax audit and get through a tax audit without penalties is:

  • Be honest - Do not try to write-off expenses that are false or not allowed

  • Keep good records - Poor recordkeeping gives many taxpayers a problem during a tax audit

  • Don't make mathematical mistakes - Errors in a tax return can trigger IRS audits

What happens if a pilot or flight attendant loses and audit?

If an underpayment is discovered, penalties on the underpaid tax could be around 20%, plus interest on the underpayment could be due.  If the underpayment is due to fraud, a more serious course of action could result bringing the tax penalty up and over 75%.  The most serious cases of fraud or tax evasion could lead to legal trouble, including possible imprisonment.

What should pilots & flight attendants do to prevent being audited?

Airline flight crewmembers can write-off many aviation expenses from their tax returns, but it is possible to go too far.  Certain red-flags can trigger a tax audit.  Good judgment on the behalf of the tax paying airline crewmember is the best practice to avoid IRS tax audits, yet that alone won't necessarily prevent one.  If a taxpayer is audited, it is important to gather tax records and prepare for it.  It might be a good idea to seek the expertise of a CPA or Tax Attorney.

What are audit red flags for pilot or flight attendant taxes?

An IRS tax audit can be triggered randomly, or by an error in filing a flight crewmember's tax return.  In recent years, the percentage of taxpayers that were audited was 1% to 2% of the tax paying population.  Some of the situations that might increase the likelihood of an audit are:

  • High Income (Greater than $100,000 increases the odds according to many experts)

  • Unusually High Deductions (Take the deductions you are entitled to, but stretching deductions beyond what is reasonable can increase the odds of an audit)

  • Mathematical Errors (Mistakes on a flight crewmember's tax return can increase the odds of a tax audit)

  • High Charitable Contributions (When the amount donated to charity is significantly higher than others in the same tax bracket, a red flag could be triggered by the IRS)

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