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7 Tax Tips to Help Avoid an IRS Audit

Your odds of being audited are quite low — but you can reduce them further in several ways.For example:

  1. Don’t fail to file a return. If you don’t file a tax return for any reason, the IRS may contact and question you. Even if you had no income in the tax year or had no taxes due, you still need to file a return, explaining that you have no income and/or demonstrating that you have no taxes due.
  2. Try not to have no income. Your odds of being audited are higher if you report no income — even if you’ve filed a return. For example, if you have your own business and you posted a net loss for the year, the IRS might want to double-check to make sure you’re not pulling a fast one. In 2014, about 5.3% of returns with no income were audited.
  3. Don’t omit information. If you fail to report any income or omit any other information, that can raise flags at the IRS and get you audited. Even if it’s just a tiny dividend payment you don’t want to bother mentioning, it needs to be included — not only because it’s the right thing to do, but also because the IRS probably already knows about it and will wonder why you haven’t mentioned it. Entities that pay you — whether it’s salary payments, dividend income, interest paid, or something else — generally report having done so to the IRS. The IRS then expects your return to include all of these payments.
  4. Don’t be messy. Your odds of being audited can rise if your handwriting is hard to read. The IRS needs to be able to make sense of your tax return, and if it can’t tell whether that’s a 0 or a 6, or your return is just too hard to read, it will draw attention. Avoiding audits involves trying to avoid having any attention drawn to your return. You want it to be one of millions that smoothly gets processed without question.
  5. Don’t make math mistakes or other mistakes. Double-check your calculations and be sure that any numbers you’re entering in your return are correct. Enter the right numbers in the right boxes. It can be very helpful to use tax-preparation software and to electronically file your return, as such returns can be more accurate than hand-prepared ones. Remember to sign your return, too: Unsigned returns also draw the attention of the IRS.
  6. Don’t be dishonest. If you’re stretching the truth on your tax return — especially if you’re self-employed — you may catch the attention of auditors. Be ready to substantiate any claims (business meals, business-related miles driven, business entertainment costs, etc.) with receipts or other documentation. If you’re claiming a home-office deduction, you’d better actually have a home office, and one that conforms to the rules, such as being used solely for your business.
  7. Don’t use a problematic tax preparer. If your tax return is prepared by your well-meaning uncle, you could end up audited if he makes mistakes. Professional tax preparers can make mistakes, too, of course. Unscrupulous ones can be committing fraud with your return in order to lower your taxes, or they can even be stealing from you. Ultimately, you’re the one responsible for your tax return. Still, consider using a qualified preparer, as a good one will be much more informed about tax laws, available tax breaks, and strategies you might employ. A good tax pro can serve you well and reduce your tax bill.

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