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July 1, 2021


Tax issues relating to investments could trigger audits

Seeing money as a tool rather than a reward can often help Texas residents increase their wealth. The notion that spending money to make money rings true for many people, especially those who choose to invest. However, while investments can certainly prove profitable for investors, it is also possible for those investments to lead to tax issues with the IRS.

Problems typically arise when it appears that information relating to investments has not been reported correctly. While it may be true that a person garnered a considerable amount of income from an investment, the IRS may still want to take a closer look to ensure that those numbers are not inflated unnecessarily. Of course, certain situations could arise in which the IRS may conduct audits for suspicious activity.

Some common reasons that the IRS may take a closer look at investment income information include:

  • Significant deductions on real estate investments that go beyond what is expected
  • Not reporting capital gains after selling stock or other securities and earning a profit
  • Not filing tax information regarding investments on time
  • Failing to report all of the interest and dividends from the investments 
  • Issues with employer stock options
  • Not including cryptocurrency on tax returns

While some of the tax issues could arise simply due to oversight or errors in filing, it is still important that they are addressed properly. The IRS wants to ensure that all tax information is correct, and if the agency believes that something is amiss, Texas taxpayers could face audits. Fortunately, investors can defend against audits and ensure that the IRS itself is not making a mistake.