Being Audited by the IRS – How to Avoid It

When you’re faced with an IRS tax audit, it can be scary whether it’s a business or a personal audit. Commonly, people don’t know enough about tax laws to prevent an audit from occurring which gives the IRS a leg up. Audits can be prompted by inconsistencies on a taxpayer’s tax return, simply randomly, or because the information on the return is different from what the IRS has accumulated from other sources. Say for example you forget to include some interest from a bank account on your tax return, then when the bank gives their report to the IRS it brings inconsistencies to light.

That type of audit is called a letter audit, which in most circumstances can be cleared up quickly. A letter is sent to the taxpayer telling them that the IRS went ahead and made some changes to their tax return giving the taxpayer the option to argue or accept. On the other hand, an audit that questions the validity of expenses or write offs or results in large amounts owed to the IRS can be much more challenging. At this point you may want to seek the help of a tax professional to affirm that the expenses are realistic and vital to the business or taxpayer in question or possible the IRS has incorrect information.

An experienced defense audit professional will not only carefully look over the taxpayers return, but will also review other areas of the return to see if there are any additional write offs which could counterbalance any extra tax payable because of the audit.

Because an audit can simple be random, there really is no full proof method to avoid this with 100% certainty. However, you can better position yourself to come below the IRS radar every year.

Report all income. Every last penny.

Check for errors.

Check and re-check, then check again. Have documentation.

Keep all forms that show your wages. Keep records for all deductions. Schedule C requires records of all deductions. Remember to send and sign your return. you would be surprised how many people every year forget to send their already prepared tax returns and just as many forget to sign them.