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Posts Tagged ‘Tax Audits’

Being audited can be a very stressful, not to mention financially hazardous, experience. While many people will go their entire lives without being audited for taxes, not everyone is that lucky. There are, however, some ways to help prevent the tax man from checking up on you. It’s impossible to guarantee that you won’t be visited by the IRS, but at the very least, you can avoid some of the red flags that we know for sure catch their attention.

Keeping Good Records

It’s very important to maintain records so you can prove that what you’ve entered on your tax return is true. In the case of an audit, all the paperwork will be very useful, too. In addition, maintaining the papers and forms that you’ve collected over the year will help you file accurate tax returns, which is another good way to avoid being audited since discrepancies can alert the IRS that something fishy is going on.

Running your own business is automatically a red flag, but you can reduce the problem by proving that you aren’t hiding anything. This is done by taking meticulous records and making sure that even things like driving to the market on your way to work isn’t counted as tax deductible, to show the IRS that you are not trying to slip things in under the radar.

File Returns Correctly

Even minor mistakes in math can make the IRS pay attention and if the issue is more than just a little, it’s likely that they’ll want to check up on you and make sure there’s no good reason behind the error, apart from poor math skills. This is something that can easily be remedied by having someone else take a quick look over the return or getting a tax accountant to do your returns for you.

Make sure you also file under the correct area, especially if you are earning money from a side business. While it’s tempting to round down or alter the records just a bit to avoid moving into the next tax bracket, it just isn’t worth the hassle of being audited and the potential fees that could come out of an audit. You’ll be better off in the long run just sticking to the facts and not making attempts to hide anything.