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How to Avoid an IRS Audit

How to Avoid an IRS Audit
Ines Zemelman, EA
01-Feb-17

Even if you follow the law as best as you can by paying your tax bills on time and filing your tax return every year, you are always potentially subject to an IRS audit. No one knows for sure what criteria the IRS uses to trigger an audit, and you can never eliminate the risk entirely, but there are generally accepted practices that will minimize that risk. In the event of an audit, taking the following advice to heart will also make the audit go much more smoothly.

Don’t Forget To Turn The Lights Off

It may seem obvious, but it is often simple errors that lead to an audit. Make sure you use the correct tax forms, and fill them in completely and properly. Double check all of your math. Many audits are the result of simple math errors. Tax preparation software will help tremendously with avoiding these mistakes. If the IRS does catch a math error, you will probably get an IRS notice correcting the error. The less attention you draw to yourself, the better off you’ll be.

Cross Your T’s, Dot Your I’s

There are many tax forms that are sent to taxpayers. What many people don’t realize is that these same forms are sent to the IRS. Any form that is received by the IRS must be properly reported to the IRS on your tax return. When the IRS finds discrepancies, red flags go off - this you want to avoid.

This is the easy part. All Forms 1099, W-2, 1098 - forms that taxpayers receive to report interest earned, retirement distributions, wages earned, etc - failure to properly report these items will make your life hard. Make sure all of the income on these forms are included on your tax return.

Don’t Be Greedy

Deductions and claiming of losses are perfectly legal. However, do not claim anything you cannot substantiate in the event of the IRS requesting additional information. If there is no paper trail and you can’t defend your claim - do not make it.

Please review our article on the top 10 High Risk Tax Saving Strategies that you should avoid.

Document Everything

If you are audited, the documentation will make the experience flow much more smoothly.

There is much speculation about what can trigger IRS audits, such as filing a Schedule C, taking a home office deduction, or claiming passive losses. But, it really isn’t possible to predict. The best thing to do is to simply claim reasonable and defendable items.

KISS Principle

Don’t disclose more information than is necessary, doing so is just inviting questions from the IRS. Sure, complex tax returns may require an occasional explanation; but - keep it simple. There is no need to attach things like bank statements unless the IRS asks for it later.

Ines Zemelman, EA
Ines Zemelman, EA
founder of Taxes for Expats
She may be reached at: