Avoiding an IRS Audit

Tips to accurately file a claim and reduce the risk of an audit.

There is no foolproof method of avoiding an IRS audit. It is also not very sensible to not claim the deductions that you are entitled to receive just to lessen your chances of an audit. There are some practical tax tips that you can apply that will reduce your chance of being selected for an audit.

If you are self-employed, for example, you have a much higher risk of being the target of an audit. It is a good idea to incorporate. The IRS will be much less likely to audit the return of a Corporate entity. Another good idea is to take the full extension. The last date for filing an extended return is October 15. The IRS will usually have filled its quota of returns selected for audit by then. If you do follow this tip, make sure that you have paid any taxes due by the April 15th deadline to avoid any penalties or interest charges.

There are several things that you can do on your return itself that will make you a less likely audit candidate. Make sure that all of your tax information is accurate, and that your return is completely filled out. It is important to make sure that the return is neat and that whole numbers that appear rounded off are avoided. Even when you file your taxes online by using the free e-file services, you should be prepared to send detailed explanations about any item that might appear even slightly unusual or represents a drastic change of income or expenses from previous returns.

The IRS uses a computer generated system for selecting potential audit returns. The returns that are red flagged by the computer are reviewed by an agent who has been trained to recognize the potential for extra tax income. The agent will be looking for unreported income or drastic changes in income from previous years. They will be looking for extremely high deductions in the areas of charitable contributions and such business deductions as automobile expenses. The important thing and the best audit tip is to keep accurate records of all your financial affairs. Not only do good records make tax preparation easier, but they also will make a potential audit less threatening.

In conclusion, there are ways to make an audit less likely, but an audit need not worry the honest and careful tax payer. There are some cases where an audit actually results in a larger refund. Just make sure your tax information is accurate and your return is honest and complete, and you should have nothing to fear.

This article first appeared in Church Finance Today, January 2008.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Related Topics:

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

ajax-loader-largecaret-downcloseHamburger Menuicon_amazonApple PodcastsBio Iconicon_cards_grid_caretChild Abuse Reporting Laws by State IconChurchSalary Iconicon_facebookGoogle Podcastsicon_instagramLegal Library IconLegal Library Iconicon_linkedinLock IconMegaphone IconOnline Learning IconPodcast IconRecent Legal Developments IconRecommended Reading IconRSS IconSubmiticon_select-arrowSpotify IconAlaska State MapAlabama State MapArkansas State MapArizona State MapCalifornia State MapColorado State MapConnecticut State MapWashington DC State MapDelaware State MapFederal MapFlorida State MapGeorgia State MapHawaii State MapIowa State MapIdaho State MapIllinois State MapIndiana State MapKansas State MapKentucky State MapLouisiana State MapMassachusetts State MapMaryland State MapMaine State MapMichigan State MapMinnesota State MapMissouri State MapMississippi State MapMontana State MapMulti State MapNorth Carolina State MapNorth Dakota State MapNebraska State MapNew Hampshire State MapNew Jersey State MapNew Mexico IconNevada State MapNew York State MapOhio State MapOklahoma State MapOregon State MapPennsylvania State MapRhode Island State MapSouth Carolina State MapSouth Dakota State MapTennessee State MapTexas State MapUtah State MapVirginia State MapVermont State MapWashington State MapWisconsin State MapWest Virginia State MapWyoming State IconShopping Cart IconTax Calendar Iconicon_twitteryoutubepauseplay