The Best Way to Avoid an Audit? Preparation

Of all the letters one could receive in the mail, notification of an IRS audit is probably ranked really low. While some taxpayers are selected for random audits every year, the chances of that happening to you are actually very small. You are much more likely to fall under the IRS’s gaze if you make one of several common mistakes.

That means your best chance of avoiding an audit is by doing things right before you file your return this year. Here are four suggestions:

Don’t leave anything out.

Missing or incomplete information on your return will trigger an audit letter automatically, since the IRS gets copies of the same tax forms (such as W-2s and 1099s) that you do.

Double-check your numbers.

Bad math will get you audited. People often make calculation errors when they do their returns, especially if they do them without assistance. In 2016, the IRS sent out more than 1.6 million examination letters correcting math errors. The most frequent errors occurred in people’s calculation of their amount of tax due, as well as the number of exemptions and deductions they claimed.

Don’t stand out.

The IRS takes a closer look at business expenses, charitable donations, and high-value itemized deductions. IRS computers reference statistical data on which amounts of these items are typical for various professions and income levels. If what you are claiming is significantly different from what is typical, it may be flagged for review.

Have your documentation in order.

Keep your records in order by being meticulous about your recordkeeping. Items that will support the tax breaks you take include: cancelled checks, receipts, credit card and investment statements, logs for mileage and business meals, and proof of charitable donations.

Take advantage of the multitude of apps available to track various deductible expenses, such as MileIQ, which tracks business and personal mileage. – Rich Middleton, CPA

With proper documentation, a correspondence letter from the IRS inquiring about a particular deduction can be quickly resolved before it turns into a full-blown audit.

Further Reading:
Common Audit Triggers (and Your Likelihood of being Audited)
How Long Do I Keep My Return and Other Recordkeeping Questions [VIDEO]

Remember, the average person has a less than 1 percent chance of being audited. If you prepare now, you can narrow your audit chances even further and rest easy after you’ve filed. Fill out a ‘Contact Us‘ form to meet with an Alloy Silverstein CPA.