While it’s impossible to guarantee that you won’t be selected for an IRS audit, there are several steps you can take to minimize the likelihood of being audited and to ensure that you’re well-prepared in case it does happen.
Keep in mind that these are general suggestions and not a guarantee against an audit:
1. Accurate and Complete Reporting: Ensure that all the information on your tax return is accurate, complete, and matches the information provided on your W-2s, 1099s, and other tax forms.
2. Consistency: Maintain consistency in your reporting from year to year. Drastic changes in income, deductions, or credits could raise red flags.
3. Avoid High Risk Deductions: While you should claim all legitimate deductions and credits you’re entitled to declare, be cautious about excessively large or unusual deductions that might not align with your income level or occupation.
4. Documentation: Keep thorough and organized records of all your financial transactions, income sources, deductions, and credits. This documentation will be crucial if you are audited.
5. Understand Tax Laws: Stay informed about tax laws and regulations to make sure you’re not inadvertently making errors on your tax return.
6. Seek Professional Help: Consider using a qualified tax professional to prepare your return. They can provide guidance on proper reporting and help you take advantage of applicable deductions and credits.
7. E-File: Electronically filing your tax return reduces the chances of transcription errors that can trigger an audit.
8. Report All Income: Ensure that you report all sources of income, including freelance work, side gigs, rental income, and investment gains.
9. Appropriate Business Deductions: If you’re self-employed, ensure that you’re only claiming legitimate business expenses. Keep clear records of your business activities and expenses.
10. Home Office Deduction: If you’re claiming a home office deduction, make sure your home workspace meets the IRS criteria for this deduction.
11. Charitable Contributions: If you’re claiming charitable deductions, keep receipts and documentation for all your contributions. Make sure your claimed amounts are reasonable and in line with your income.
12. Foreign Accounts and Income: If you have foreign accounts or income, ensure that you’re complying with reporting requirements such as the Foreign Bank Account Report (FBAR) and Foreign Account Tax Compliance Act (FATCA) reporting.
13. Avoid Abusive Tax Schemes: Stay away from aggressive tax schemes or tax evasion strategies, as these could lead to serious legal consequences.
14. Respond Promptly: If you’re contacted by the IRS, respond promptly and provide the requested information. Ignoring IRS communications can escalate the situation.
15. Audit Insurance: Some tax professionals offer audit insurance, which can provide assistance and representation in case of an audit.
Remember that the goal is to accurately report your income and deductions while maintaining proper documentation to support your claims. If you’re ever audited, having organized records and evidence will make the process smoother.
*Disclaimer*
Gabby is not a licensed tax professional, and the information provided should not be considered as professional tax advice. The suggestions and guidance offered are based on general knowledge and should not replace advice from a qualified tax professional. It’s important to consult with a certified tax advisor or accountant for personalized assistance regarding your specific tax situation.
Photo credit by Stevepb from Pixabay
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Gabriella Vita is from Las Vegas, NV and has been writing for over ten years under multiple pen names. She believes variety is the spice of life, which is why she enjoys writing on a plethora of subjects. Email her at gabby@ynotcam.com.
