The Internal Revenue Service refers to an audit as a simple examination of your financial records. To you as a taxpayer, it is much more than that. Even if you have nothing to hide, it brings intimidation, fear and stress into your home and business. You want to do everything you can to avoid an IRS audit trigger.
Understand the process used by the IRS to select tax returns for audit. In most cases, the return is selected at random through a series of checks and comparisons. This does not mean you have done something wrong. Always assume the position you are an honest, cooperative taxpayer.
You are less likely to trigger an IRS audit if you follow a few suggestions:
- Always include all income you know will be reported to the IRS. This includes employers, financial institutions, investment brokers, etc. The number one IRS audit trigger is unreported income.
- Double-check your return for errors in math. The IRS computer will catch and correct math errors, but this brings attention to your return and can trigger an audit.
- Do not use round numbers on your tax return. The IRS assumes round numbers are an approximate amount when leaves the item open for question. (Example: A contribution of $400 is best reported as $422.)
- File your tax return close to the April 15 date, or request an extension to August or October. Your return will be in a larger volume on April 15 and not as conspicuous. If you extend your filing date, most of the earlier returns have already been selected for audit.
- Be certain to answer all questions on the tax return. Even if a question does not apply to your situation, the IRS will complete the answer, sometimes with detrimental results.
- Present an organized, neat tax return. If the IRS has trouble reading or understanding your documentation, they may take a closer look.
- Unusual deductions should be accompanied by an explanation. Clearly explain the circumstances supporting your claim and provide backup documentation.
Never hesitate to contact a tax professional when in doubt. There are many qualified tax relief firms available to assist you if you are unable to avoid an IRS audit.