How to Avoid an Audit

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The Internal Revenue Service will not single out a person unless they find something wrong. They have a computer program that compares deductions and checks differences within your income bracket. If the program finds something unusual, action has to be done. Or you were just randomly selected for an audit. When you are preparing for a return, try to put yourself in the shoes of the auditor and try to minimize red flags in your returns.

Step 1

A few things to remember, make sure that you don’t have duplicated or large deductions if you have a spouse. Secondly, the IRS will take a closer look at the group of people who receive income in cash. An example of this is a waitress, doctors, lawyers, accountants, and self-employed people because there is a higher possibility that these group of people will not report all of their income. Third, the IRS also gives special attention to large deposits. You’ll be in big trouble if you can’t explain these deposits, the IRS will begin to think that it was illegal.

Step 2

In an audit, you will be asked to substantiate your claims, you should keep your receipts and keep a detailed record of your daily expenses to guide you when you are being asked about your expenses. In your record, indicate the date, the amount, the person whom you spent the money on. Write your record in an organized manner.

Step 2

Recheck mathematical computations. You might have committed a little mistake that makes a big difference when calculated. For example, instead of subtracting you added the numbers. The IRS computers will check computations for errors. If there are many mistakes, the IRS might do a full audit. If you are self employed, it is undeniable that once or twice you made personal expenses to business expense. Be sure to prove your case and situation once they start questioning you. Aside from rechecking mathematical computations, check if you supplied the correct information about yourself and social security number. Lastly, don’t forget to put your signature.

Step 3

If you are entitled to deductions, attach copies of documents that will support that claim. For example, you made a donation to charity, attach the check or other documents that’s related to your donation. After being selected by the computer, a person will review your return, s/he can look into the documents that you attached and know its validity.

Step 4

You can choose to file your return on time, earlier or on the day of the deadline. To stay safe, don’t wait for the deadline to arrive. But if you sense an audit, you can file your return on the day of the deadline. This is alright since filing ahead of time wont lower the chances of you being audited.

Word of wisdom, be honest don’t try to fool the IRS! If you have a hobby, don’t label it as a business. Don’t forget to read the instructions of return forms and keep copies of your returns. If you are being audited, never panic. Gather all the needed documents, receipts and forms but if you haven’t been filing or employed fraud, get a good accountant and lawyer immediately.

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