Staying Safe From an IRS Audit

on June 6, 2012

The thought of having to deal with the IRS is not something that most people find comforting. In fact, many people get downright scared when they think of having to handle an IRS audit. Taxes are pretty much something that you just have to deal with, and figuring out how to avoid an audit should be one of your top priorities. The IRS usually comes out ahead when they audit taxpayers, so if you want to avoid paying extra money in taxes, here are a few tips to keep in mind.

Double Check EverythingBefore you send your tax return into the Internal Revenue Service, make sure that you double check everything. Make sure that your math is correct on every page of the return. Check to see if you included all of your possible sources of income and deductions. Check to see if you included relevant tax forms like 1099’s. Many people simply get careless when they do their tax returns, and it ends up hurting their chances of avoiding an audit.

Be Careful With Home Office

If you are self-employed or do any work from home, you may be entitled to take a home office deduction. There’s nothing wrong with taking a home office deduction, and many people do it every year without any problems. The problem comes in when you try to take a deduction that’s a little bit too big. With the home office deduction, you get to add up expenses that are related to your home, and then take a percentage of those expenses based on the size of your home office. If you make $100,000 per year in your home business, but you’re claiming a $70,000 home office deduction, you’re probably going to get audited. Make sure that your home office deduction is reasonable for the size of your office and your business.

Unreasonable Donations

When you donate money or goods to a charity, you can deduct the amount of those donations from your taxable income. There’s not a problem with taking a deduction for charitable contributions, but if you try to take huge deductions for this, there’s a good chance you’ll be audited. If you make a charitable contribution, you’re going to need to keep records of it. Make sure that you get a receipt from the charity to prove your donation. Otherwise, the IRS may disallow your deduction.

Under-Reporting Income

Another way that you could be audited is to under-report your income. In some cases, you can get away with it and the IRS will never know the difference. However, sometimes the IRS will find out and audit you as a result. For example, imagine that you received a big cash payment for your services, and you decided not to report all of the payment. If the person that paid you happens to be audited by the IRS, they’ll see this big cash payment going out. They will then check your income and see if it matches up. If not, you’ll probably get audited.

Keep these tips in mind to avoid having to go through an audit. If you do your best, and try to be as honest as you can in your tax return, you’ll lower your chances of having to be audited.

Found in: Taxes
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