How to Avoid a Tax Audit

No one wants to get that letter saying “you are being audited by the IRS”. In fact, just hearing the word “audit” has a tendency to send most people into panic mode. But the truth is, the chance of being audited is actually 1%. Although, the IRS does randomly select taxpayer at random for an audit each year.

You’re more likely to attract the attention of the IRS and trigger an audit if you make some of several common mistakes. That’s why you should doing things right will help you avoid an audit. Here is a list of common mistakes that may trigger an IRS tax audit.

* Missing information. The IRS receives the same tax forms that you do, such as: a 1099 or W-2s. When there is incomplete or missing information on your tax return it automatically triggers an audit letter.

* Review your figures. Math miscalculations are common especially for those who do their own taxes. The errors may be in the amount of tax due, the number of exemptions, or in the deductions. Any of these things will trigger an audit. FYI: The IRS sent out more than 1.6 million examination letters correcting math errors.

* Organization. Be prepared. Organize your documents. Keep all documents that will support your deductions. The documents will include: receipts, credit card or investment statements, canceled checks, mileage and business meals, cancelled checks, and proof of charitable donations. If you receive a correspondence letter from the IRS, don’t ignore it. When you have the right documentation any issues can be quickly resolved rather that turning into a full-blown audit.

* Standing out. Try not to stand out. The IRS looks closely at charitable donations, business expenses, and high value itemized deductions. The IRS has software that references data statistics on amounts of different items that are typical in various income levels and professions. You may be flagged for review if what you are claiming has a significant difference from the standard items.

Being prepared with good organized record keeping decrease the stress if you are selected for an audit. If you need assistance contact our office at (866) 497-9761 to schedule an appointment with our advisors.