How To Avoid An Audit

There are thousands of people each year who get the dreaded news that they are going to be audited. An audit is when an individual or a business gets a visit from an IRS representative and they look at the receipts and any information that you have used in order to file your return.

But there is no need to panic yet. There are ways to avoid an audit at all costs. The first rule of thumb when doing your taxes is to always make sure your math is right. It happens more often than not that people make mathematical errors but when you make a huge mistakes that happens to work in your favor, the IRS wants to check it out.

Rule two, make sure that you have arranged your finances so they do not stand out. When you have your own business it may be easier to hide the income or maybe you would be able to create some extra deductions by taking personal expenses into business expenses. But even with those you have to be careful. When you, for example take a car that you may have purchased for your child and that car depending on the type of car you purchased may raise a flag.

Another way to avoid an audit is to pay your employees or if you are an individual gets paid in cash. Cash and no proof of income such as a pay stub will raise flags especially when you file a tax return with no W2. Another rule of thumb is substantiate your items. If you have travel, food or entertainment deductions the IRS will take a good look at those above anything. If you have a fear of being audited then do yourself a favor and keep all of your receipts. Keep your receipts organized into categories and try to keep them in date order.

If you do get audited then the last thing you want is to have is an unorganized shoe box of receipts. Sometimes people get audited for no reason. Sometimes the IRS computer pulls a name out randomly for an audit. Another point and most people don?t know this but if once you file your return the IRS can audit you up to three years after that return making it more challenging to keep receipts in order.