Avoiding Audits
Since an IRS audit is one of life’s most unpleasant experiences, it pays to avoid one at all costs.
You can reduce your chances of being audited by avoiding certain red flags that mark your tax return as suspicious.
IRS Red Flags
- Claiming deductions for charitable donations that are disproportionate to income.
- Claiming deductions for travel and entertainment that are disproportionate to income.
- Noticeably under reporting income (e.g., wait staff in restaurants under reporting tips).
- Claiming more than 35% of gross income in itemized deductions.
- Taking work-at-home deductions while working in an office.
- Claiming bad debts.
- Making errors on personal information (misspelling your name, wrong address, etc.).
How to Decrease Your Chances of an Audit
- Be honest about your deductions and income.
- Keep meticulous records.
- Have your tax return prepared by competent professional.
- File your return electronically (which eliminates data entry errors at the IRS).