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Here’s How To Avoid IRS Tax Audit

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The IRS manages tax audits either by mail or through an in-person interview to review your record but there are ways to avoid mistakes and taking the right steps now, you can minimize your risk of an IRS audit down the road.
Here Are Ways To Prevent A Tax Audit And Avoid Common Mistakes (PHOTO: Cook CPA Group)

The IRS manages tax audits either by mail or through an in-person interview to review your record but there are ways to avoid mistakes and taking the right steps now, you can minimize your risk of an IRS audit down the road.

The IRS manages tax audits either by mail or through an in-person interview to review your record but there are ways to avoid mistakes and taking the right steps now, you can minimize your risk of an IRS audit down the road.

Here Are Ways To Prevent A Tax Audit And Avoid Common Mistakes (PHOTO: Taxes For Expats)

Ways To Prevent IRS Tax Audit

Here are ways to avoid IRS tax audits.

1. Enter Your Information Correctly

Make sure you do things correctly committing mistakes when you enter your Social Security number or misspelling your name can result in the IRS rejecting your return or worse, having to discover the answer to the question, “What is tax audit?” the hard way. If you make this kind of error you’ll have to refile, which will slow how quickly you receive a refund.

2. Provide Accurate Numbers

The income amounts you enter on your return must match the information the IRS accepts through W-2 and 1099 forms. If they don’t, you’re asking for a problem. According to Crystal Stranger, El Paso, Texas-based enrolled agent, National Tax Practice Institute fellow, and chief operating officer at GBS Tax & Bookkeeping, IRS computers cross-check the information reported to them on your tax return with the knowledge that is obtained from businesses filing informational returns. Hence, If these details are not a match, you are nearly ensured to receive a computer-generated audit letter.

3. Report All Income

Reporting all the earnings on your tax return is a must. whether you make any money outside of your regular job, said David M. Hryck, a partner at Duane Morris. “If an individual or company that is paying you reports the business, you would be lifting a red flag,” he said.

4. Avoid Claiming Too Many Deductions

The IRS chooses some returns for audit founded on how different your return is from the statistical norms for comparable tax returns. If you are entitled to a deduction, you must claim it but be prepared to back it up if the IRS inquiries.

5. Minimize Year-to-Year Differences

The IRS determines returns to audit based on comparisons with your tax returns from previous years. “If there is a big differential of an amount from one year to another, it would increase your chances of being examined,” said Craig Smalley, an enrolled representative and founder and CEO of CWSEAPA, an accounting and financial services firm with offices in Delaware, Nevada, and Florida.

6. Report All Foreign Income

Report all income on your US tax return, however of where you gained it. Americans need to understand that saving or earning money outside of the country, does not mean the money is free money. Fail to declare this cash and not only are you at risk of a tax audit, but you might also be guilty of a crime if you are hiding offshore income.

 

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