AVOID AN AUDIT
We all dread the “letter” from the IRS, your heart sinks and you just stare at it without opening it.
I have had to address this question many times, “What do I do if I get audited?”
We have supplied 7 ways to help you avoid an audit. Let’s jump right into it now, some of these points will help prevent you from receiving that awful letter from the IRS.
1. BE EXACT AND NEAT: A clean file, believe it or not, can keep you out of trouble.
We had a lady come into our office with “The Letter” from the IRS which stated that they could not read her return.
Please answer every question on your return, make sure it is legible also. Make sure the Federal and State returns match.
Double check addresses, spelling of names and social security numbers.
2. WARNING FLAGS:
• Bad debt expenses
• Home office expenses
• Travel expenses
• Meal expenses
• Entertainment expenses
• Non-profit contributions
3. INCORPORATE IF YOU ARE SELF EMPLOYED: Self employed tax payers are the single most class susceptible of receiving an audit.
We suggest to all of our self employed clients that they set themselves up as a Limited Liability Company (LLC) or a Corporation.
4. INCLUDE EXPLANATIONS: If the overall return has a chance of raising an audit flag you should include extra forms, receipts and documents to support all claims.
Our tax team is trained to identify warning signs that may alert the IRS, we believe it is better to err on the side of caution.
We have incorporated a special software, when doing your taxes, that alert us to a possible inconsistency. (Our staff will also compare your previous years returns.)
This preparation will not stop the system from flagging you but it may reduce your chances of receiving an audit. The IRS agent will be able to dig further and see supporting evidence.
5. FILING AMENDMENTS IS A “NO, NO”: Filing amendments to your original return brings flags to the amended part and the original. Get it right and correctly file the first time.
6. ITEMIZE DEDUCTIONS: Clients like to tell us “We need you to be creative this year.”
To us that’s another word that will raise red flags with the IRS.
The IRS’ biggest concern is “creative bookkeeping.”
7. SELECTION PROCESS: This is random with the IRS, not a flag process.
We call this the “Luck of the draw.” Just follow the six points above to assist in this process.
We can answer tax questions for you any time of the year. Our team can get you your answers in a timely manner. Just leave a comment below with your question. Also, as a bonus: I have include our “TAX CHECKLIST“ that we use with out clients.