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5 Tips for Avoiding an Audit

Guest post by: Stephanie Horne

Article Overview: Most audited tax returns are selected for review either because the filer is part of a target group or because a computer program selects the return. The computer system selects many returns randomly, but there are some red flags that will draw the Internal Revenue Service's attention.

5 Tips for Avoiding an Audit

The key to avoiding an audit is to minimize your exposure. Here are5 things you should try to avoid:

1. Math mistakes

The biggest reason people receive letters from the IRS is addition or subtraction errors. Fortunately, math errors rarely lead to a full audit. Still, double-check your math before you send in your return.

If you receive a letter from the IRS saying you owe money, check your numbers first. Sometimes, an IRS employee misreads one of your numbers, or the number is keyed incorrectly into on the IRS computer system side of things.

2. Interest and dividend reporting doesn't match

If the amounts reported in supporting documents do notmatch the amounts on your return, you will get a letter.

3.Being on the IRS hit list

Those who receive much of their income in cash are traditionally on the radar screen of IRS agents looking for unreported income. Recently, the agency has also pinpointed small-business owners and the self-employed.

5.Exceptional deductions

An IRS computer program compares your deductions with others in your income bracket and weighs the differences. This secret IRS formula, called the DIF Score, is used to select returns with the highest probability of generating additional revenue through audits.

6. You have the wrong preparer

Let's face it: Some tax preparers are less than professional. Some, unfortunately, are crooks. If your preparer promises you a refund before checking all of your paperwork, run as fast as you can.

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Article Tags: computer programs, filer, internal revenue services, red flags, target group, tax returns



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