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Avoiding an IRS Audit

<H3>Avoiding an IRS Audit</H3>

The IRS is an entity that many people fear. The last thing they want to do is to raise red flags that result in them being audited. There are some things you can do to help reduce your risk of an audit though. Even though a small percentage of them are based completely on random computer pulls most of them are the result of certain issues taking place that have been profiled by the IRS as things that aren’t right.

Some issues that come up are simple mistakes such as when a divorced couple both claim the same children on their tax returns. Others are more complicated such as those that are self employed and continually have more expenses than income. It just isn’t reasonable to effectively operate a business year after year that has continued to lose money instead of to make it.

If you make more than $100,000 per year the chances of an IRS audit will increase. This is because it has been the pattern of behavior for those in this group to inflate their deductions to lower their rate of taxes. Yet most people don’t want to limit their income to less than this if they don’t have to just to avoid an IRS audit.

Large amounts of itemized deductions on a tax return or large amounts of contributions to non profit organizations really stick out. These are areas where the IRS is really getting tough because of fraudulent claims. Make sure you are very honest about these amounts on your tax returns.

You can be sure there are plenty of agencies that report income to the IRS as well. If what you report on your tax return doesn’t jive with what information they get from banks, online sites such as Paypal, and other reports you can be sure they will be contacting you for an audit. Even if you don’t get a 1099 or a W-2 for work you did you need to honestly report that income on your tax return.

Sometimes there isn’t anything at all that you can do to avoid an IRS audit though. However, as long as you have done things by the book you will have nothing to worry about. If you are intimidated by the thought of meeting with the IRS though hire a representative to go with you. If you have a tax preparer many of them will work with you for no cost as part of their services. Make sure you keep all of your records for seven years though so you have proof of your claims on your tax returns.

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