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How To Avoid IRS Audits

Posted on 04, Feb, 2013


If you ask most people about doing their tax returns each year you'll see that hint of fear in their eyes, and if they're really honest they'll admit they live in fear of filing a tax return each year. It's not that they've done anything wrong, nor are planning to do anything wrong, but instead it's because most people live in fear of the dreaded IRS audit! Some people are so afraid of getting audited that they simply don't file a return at all, which isn't a smart thing to do of course.

Having the financial resources to hire a tax professional to complete your tax return for you is ideal but not everyone is able or willing to do that. In the case where you're going to complete your own returns then we'd like to share some tips with you on how you can avoid getting tangled up in that IRS audit you fear so much.

Reasonable Claims

The offices of the IRS are filled with well-informed people who have seen and heard every financial claim you can imagine, so making outlandish claims for deductions for ridiculous amounts isn't going to do you any favors. You might think this will go unnoticed because you assume there's no human element involved in processing tax returns anymore but that couldn't be further from the truth. One of the key areas an IRS agent will pay attention to is when you're quite obviously over-estimating your charitable deductions. That alone can pretty much guarantee an audit.

Additional Income

If you have a part-time business that you're running from home then it's a good idea to be honest about what you're making because the IRS are well used to people trying to claim that their part-time business expenditure almost exactly match its income. When the IRS see any part-time or sideline business making what is effectively a loss two years in a row then this will peak their interest and you can expect an audit as a result.

Detailed Information

Many of the reasons why people get audited by the IRS are that they either omitted information completely or it was so ineligible that the IRS had no other option but to examine your finances further. Making sure that your social security number (SSN) is correct and included on your tax return form is what the vast majority of people simply forget to do - this absolutely will cause an audit. Also make sure that you do not round numbers up or down “for convenience” - this will set off alarms in the mind of an IRS agent reviewing your return.

Avoid Sloppiness

Whether you're completing your tax return by hand or electronically make absolutely sure that all of the figures are listed clearly and itemized where needed, on the form itself. If figures are smudged, edited or "whited out" repeatedly, and the agent reviewing your form has to start guessing at numbers then they simply will guess at numbers. Once they get to the point of seeing that your form is basically illegible then you'll be simply audited instead.

Everything Adds Up

You're submitting a tax return so it should go without saying that your math should be correct throughout your return. If your math isn't correct or the reviewing agent has any reason to doubt your claim then you can wind up being audited.

As you can see the IRS does not deliberately set out to audit people, they only do it when they see discrepancies in the tax return. If you find yourself genuinely struggling completing your tax return, then it's time to hire a tax professional (a CPA, EA or other) to do it for you.

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