3 Tips for Taxpayers to Avoid an Internal Revenue Service (IRS) Audit
Money Central at MSN.com recently published a helpful article for those who never want to get audited by the IRS. Following these steps can keep you off the IRS's radar and out of the hot seat at tax time.
Tip #1: Double check your math
The IRS automatically checks and corrects arithmetic errors on your return, and a few mistakes is not going to trigger an audit. That said, too many mistakes could send up red flags that you weren't careful in your preparation, and that could lead to an audit. To select audit subjects, the IRS generally compares your deduction to the average deductions claimed by similar taxpayers. If yours are significantly different, they may decide to take a closer look.
Tip #2: Don't stand out from the crowd
Several groups are more likely to be audited than others. A highly-audited group includes the self-employed, who have more opportunity to hide income or falsify business expenses. Other suspect groups include those who make most of their income in cash, offshore credit card users and high-risk, high-income taxpayers.
Tip #3: Be prepared to substantiate
If you are audited, the IRS will probably focus on those items that are typically not adequately documented by taxpayers. These are generally automobile expenses, travel, meals and entertainment. Meals and entertainment expenditures over $75 require a receipt, less expensive meals can be tracked in a diary.
Finally, if you do get audited, coming in with a box of disorganized receipts will work against you. The more receipts you can produce and the more organized you are, the better your chances of coming through the audit unscathed. Read more tips about avoiding an audit at 5 ways to avoid an audit.
If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact our firm for tax planning legal counsel.
