Avoid An IRS Audit

How can you avoid an IRS audit? There’s a .58% chance if you make 20-50k that you’ll be audited by the IRS, but that still adds up to 259,794 unlucky people. Here’s some strategies on how you can avoid becoming one of them:

  • Keep your papers neat, include all necessary attachments, and sign where you’re supposed to. If your papers are sloppy, it’s a trigger to IRS personnel that your numbers might be sloppy too.
  • Give exact values on your non-cash contributions
  • Deducting big losses from what you say is a business but what the IRS says is a hobby is a red flag.
  • Make sure the income you’re reporting matches the income reported on the income forms the IRS is getting independent of your return.
  • Deductions high above the national average are a red flag. For someone earning $50-$100k, that’s $5,812 in deductible taxes, $2,703 in charitable gifts, and $8,946 in interest.
  • You must report all interest, dividends and misc. income. Everyone who sends you a 1099 is also sending one to the IRS.
  • Round numbers are a dead giveaway, as are “stupid” numbers. For example, the maker of “Girls Gone Wild” got in trouble for reporting $333,333.33 in false expenses.
  • Claim only legitimate deductions, unlike (true story) one “Chesty Morgan” a stripper who attracted tried to claim breast implants as a medical expense.

Here’s a few more from WorldWideWebTax:

  • You have large amounts of itemized deductions on your tax return that exceed IRS targets.
  • You claim tax shelter investment losses on your tax return.
  • You have complex investment or business expenses on your tax return.
  • You own or work in a business which receives cash and/or tips in the ordinary course of business.
  • Your business expenses are large in relation to your income on your tax return.
  • You have rental expenses on your tax return.
  • A prior IRS audit resulted in a tax deficiency.
  • You have complex tax transactions without explanations on your tax return.
  • You are a shareholder or partner in an audited partnership or corporation.
  • You claim large cash contributions to charities in relation to your income on your tax return.
  • An informant has given information to the IRS.

Personally we find taxes very confusing and intimidating and appreciate the fine services provided by our certified public accountant.

(Photo: chasingfun)

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