Small Business Resources, Business Advice and Forms from AllBusiness.com
 

Avoiding a Tax Audit

Friday, February 23 2007



There are very few people who are audited by the IRS each year. And, truly, your chances of being summoned for a tax audit are slim. But, there are some things, such as a substantial increase in income from one year to the next, that increase your chances of an IRS tax audit. While you can't completely rule out being audited, there are a few things you can do to decrease your chances of experiencing an IRS tax audit:

  • Don't prepare your tax return by hand. A neat return is less likely to be audited than a messy one. There are several tax return computer programs that can help you create a neat return, including several online tax preparation services. If you must do yours by hand, write neatly. Fill one out to get it right, and then carefully copy it onto another form. Cross-outs and sloppiness are just asking for an audit.
  • Document large deductions for unusual losses. If you sustained loss in fire or some natural disaster and are claiming the deductions, attaching insurance reports, repair receipts and even pictures to the back of your tax return is a good idea. You may be initial flagged, but when the potential audits are reviewed, good documentation could save you from a tax audit.
  • Avoid using round numbers. Round numbers are a red flag that you are just "guestimating" on your tax return. If the number is $563, then put that down. You want to show good record keeping.
  • Watch your Schedule C. A tax return with a Schedule C attached (profit or loss from business) is more likely to be audited. However, many of us need to attach them. Make sure you have good records for whatever you are claiming. I save my cable bill (for the Internet I use to do work) and other records. If your business income is small, and you aren't claiming any deductions against the income, you can report it on line 22 instead. But only try this if the amount is relatively small.
  • Avoid the IRS labels. Huh? Don't use that nice pre-printed label from the IRS? Well, it gets you in the system faster, and that means the IRS tax audit system gets you faster as well. Similar results occur with electronic filing. Even if you expect a return, waiting a little longer for it may be worth it, especially if you have some complex issues with your tax return.


There is no way to completely avoid an IRS tax audit. You may be audited no matter what you do. But you can significantly reduce your chances if you plan carefully. You can get more information on taxes and tax forms by visiting the IRS Web site.


, , , ,
, taxes, , personal finances

In addition, make sure to read these articles:

  • Distributing Profits: A Caution
  • A 2001 Tax Court ruling constrains the ability of group practices to distribute year-end profits as deductible compensation. That means you need to review your ......
  • Avoiding a Home Business Tax Audit
  • Some things can trigger an IRS home business tax audit. Safe practices can't guarantee you won't be audited, but they can certainly reduce the probability....
  • Small Business Tax Tips for Avoiding An Audit
  • The last thing you need to worry about is your small business taxes. Taxes are a fact of life and the good news is that ......
  • Announcement 2002-1
  • Q&A-15 of Notice 2002-1, page 283, this Bulletin, describes a revised Form 8717 that is to be used with section 620 applications, ie., certain Employee ......
  • Tax Tip: Now Is The Time To Start Doing Your Taxes
  • Whether you have someone else do it, or do it yourself, now is the time to start working on your taxes. Just like any other ......
  • Business Tools: The Taxman Cometh
  • If you reflect a moment on what you need to survive the tax season, the first thing that comes to your mind might be an ......
  • How Do I Pay My Self-Employment Tax?
  • Learn how to avoid tax trouble by paying self-employment tax.
  • AGMA Rising: Roll Grows 40% In Two Years
  • The little guy is putting on muscle. The American Guild of Musical Artists (AGMA) recently announced that its membership has grown 40% in the last ......
  • Announcement 2001-17
  • New Form 8875 is now available for tax years beginning after 2000. An eligible corporation and a REIT use Form 8875 to jointly elect to ......
  • IRS home page is a hit.
  • The Internal Revenue Service opened its own home page on the World Wide Web in January 1996 and already it has wooed millions of users....
  • Announcement 2001-114
  • Part IV. Items of General Interest New Form 1042-T, Annual Summary and Transmittal of Forms 1042-S Announcement 2001-114 New Form 1042-T is now available at ......
  • Tax Advice for Corporations
  • Tax matters, both state and federal, can be very complicated. The IRS and other government agencies offer assistance to small businesses.
  • IRS' Web site has banner year
  • Who says the Federal Government can't do anything right? The Internal Revenue Service's Web site had no problems, apparently, handling the extra workload as more ......
  • ComponentWare products from I-Kinetics allow...
  • BURLINGTON, Mass.--(BUSINESS WIRE)--May 3, 1996--I-Kinetics announced today the release of the Database Component Server version 3 and the OLE Client version 3, their latest ComponentWare ......

Latest Comments in  posts

No Comments Yet.

You must sign-in or sign-up to comment on this post.

Interactive Blogger Map
Use our interactive map to figure out where Bloggers are located

View AllBusiness Bloggers in a larger map
Franchising Expert
mleonard_80
Ask Mark Leonard, Our
Franchising Expert,
Your Question
Small Business Expert
rlesonsky_80
Ask Rieva Lesonsky, Our
Small Business Expert,
Your Question
B2B Sales Expert
jkonrath_80
Ask Jill Konrath, Our
B2B Sales Expert,
Your Question
Business Travel Expert
krosen_80
Ask Ken Walker, Our
Business Travel Expert,
Your Question
Finance Expert
sthacker_80
Ask Sam Thacker, Our
Finance Expert,
Your Question
Invention Expert
Ask Stephen Key, Our
Expert on Licensing Your
Invention, a Question