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.