How to Avoid Being Audited for your Tax Return

Perhaps the biggest fear of any income tax filer is the fear of being audited by the Internal Revenue Service. When this happens, a person or business must prove that the deductions and credits that they’ve claimed on their tax returns are legitimate to avoid costly fines. The actual process of being audited can be expensive as well, requiring the assistance of a CPA or other trained tax professional to make sure that all the papers in order. Rather than going through this entire ordeal, a person or business can do several things that usually work to avoid being audited.

To understand how to avoid a tax audit, a person must first learn what triggers the IRS to label a specific return as needing an audit. There are actually several well known red flags that can lead to an investigation, with a simple math mistake being the most common. Most math mistakes are able to be corrected without a full audit, but this can be avoided by checking the math again before sending in the form to the IRS.

Another trigger could be amounts on the 1040 that don’t match the accompanying 1099 forms. Non-matching totals can happen for a variety of reasons, from simple transcription error to a 1099 having the wrong social security number. This could be an honest mistake on the part of the filer, but the IRS will want to make sure that everything is correct. This mistake can also be the fault of the IRS if the amount is entered incorrectly from their end, but being able to show the relevant documents will end an audit rather quickly.

In recent years, the IRS has also started monitoring social media sites and other public forums for people who brag about cheating on their taxes. In addition, there are rewards given to people that report tax cheats, sometimes up to 30% of the extra tax that is collected. Of course, the best strategy is to pay your taxes, but those who want to try to trick the IRS should learn to not talk about this criminal activity.

Lastly, the IRS uses a formula called the DIF score that weighs your deductions against other people in similar income situations. An example of a possible deduction that could cause an audit would be an expensive car that is purchased for a small business. While all of your deductions could be legitimate, they could still trigger an audit. In dealing with deductions, a person should just be honest and make sure that they can account for any deduction that appears on their return.

The best decision a person can make to avoid an audit is to hire a tax professional to compile their yearly report and file it for them. A tax professional will be sure to check the return for any math errors and will know for sure whether seemingly applicable deductions can be used or not. The cost of a tax professional is usually quite cheap and a person who does not have to worry about the headache of a potential audit will find the money well spent.

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