How to Reduce the Chance of an Audit
by
Attorney Frederick W. Daily
Here are some suggestions to help you file a return that won't raise any audit eyebrows at the IRS.
There is no surefire way to audit-proof your tax return. Nevertheless, there are numerous steps you can take to reduce your audit risk:
- Prepare your tax return by computer. A neat, computer-prepared return looks more official to the IRS classifiers and fits the IRS bias favoring computer processing. Most professional tax preparers now use computers. There are some good PC and Macintosh programs, such as Intuit's TurboTax and MacInTax, that you can use to prepare your own return. You can prepare your return online by using TurboTax for the Web at www.turbotax.com.
If for some reason it isn't possible for you to use a computer, be certain to print carefully. A messy return -- cross-outs, sloppy handwriting, smudges -- almost screams "audit me!" It tells the IRS that you are careless and disorganized.
- Don't use round numbers for deductions -- for example, $1,000 or $12,000 instead of $978 or $12,127. It's an indication that you are estimating things rather than keeping good records.
- If you claim large deductions for unusual items, such as an earthquake, flood, or fire loss, attach documentary proof to the back of your tax return. Copies of repair receipts, canceled checks, insurance reports, and pictures are advisable. This won't stop the IRS computer from flagging your return, but the documents should catch the attention of the IRS classifier who next screens computer-picked returns for audit potential. If she thinks your documentation looks reasonable, you won't get audited.
- Avoid filing an income tax return with Schedule C, Profit or Loss for Business, that reports a net loss from a small business venture. IRS auditors go after these returns like bees toward honey.
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