Contrary to popular belief, it is possible to drastically decrease your chances of suffering an IRS audit through several proactive measures. While not fool-proof, simply considering taking these steps will go a long way to helping you avoid the headaches that an IRS audit can bring. Being aware of the IRS audit process – as well as common red flags – will position you much better to avoiding an audit.
Here are several tips to help you avoid an IRS audit:
- Be truthful 100 percent of the time: Many people still do not realize that the IRS has a complex computer system meant to catch lies and mistakes on tax returns. If you are not being truthful, there is a much better chance that your return will be audited.
- Hire a tax professional to help you file your return: By hiring a professional, you can avoid three common reasons for an audit: mathematical mistakes, an incomplete return or an illegible return. A qualified professional will make sure that you are never audited due to one of these three reasons.
- Avoid filing a Schedule C if at all possible: It is a well-known fact that people who file a Schedule C are far more likely to be audited. The reason for this is a simple one: many people abuse the fact that the IRS allows them to take advantage of deductions.
- Electronically file your return: This is the quickest and most efficient way of filing a tax return and can also help you avoid an audit. With this option, you will always receive a notification from the IRS that your return was received and accepted.
- If married, file a joint return: Statistics show that if you are married and file separate returns, you are more likely to be audited. While there is nothing wrong with filing separately, a joint return will make the process easier and less complex.
- Do not use rounded numbers, unless they are absolutely accurate: If all of your numbers are rounded, it makes the IRS believe that you are not using actual figures. For example, it is not likely that you earn interest from a savings account of exactly $2,500.00.
- Sign your return: It is amazing how many people forget to sign their return each year. An un-signed return will trigger a closer look by the IRS and increase your chances of an audit.
- Form a business: Over the years, statistics have shown that legitimate small businesses are audited less than sole proprietors. Incorporating can greatly reduce the risk of an audit. Even though this means additional paperwork and a more complex return, the benefits greatly outweigh the drawbacks in the long run.
- Report all of your income: For instance, if you are self-employed, the IRS is going to have their eye on you; they are always on the lookout for hidden income. Although you may believe that hiding some of the money you earn is possible, it is not a risk that you want to take.
- Beware of huge deductions: In addition to the total amount of deductions, the IRS is also looking for those deductions that are unusually large. As long as you are honest and can back up your claims, there is nothing to worry about in this area.
There is no guaranteed way to avoid an IRS audit, but the above tips should help.
This guest post was provided by BackTaxesHelp.com, a website that helps taxpayers with various tax problems. Visit their site to find more information on IRS tax resolution, IRS tax payment plans and many other tax problems.