How to Avoid an IRS Tax Audit (I)

by Lydia Sweet

What is an audit and why do individuals cringe at the word? The Internal Revenue Service issues audits as a regulatory measure to ensure that society is completing accurate tax returns. Sometimes they are issued simply to check on something that seems awkward or you might get picked for an audit simply because your number was picked. Avoiding an audit or decreasing your chance for an audit is quite easy.
First to avoid tax deductions, claim tax deductions that you are legally entitled to. If there are items that you are not sure about consult a tax attorney or tax professional - get legal advice about what specific deductions you are able to claim. If you do not have documentation to verify the claim of a deduction it is probably not a grand idea to go ahead and make the claim. Submitting documentation along with your return will assist in preventing red flags and avoiding tax audits.

The discrimination index function is a computer ran program that aids the Internal Revenue Service. Basically, your tax return is compared to the tax returns in the same income bracket. If any deductions or claims seem outrageous compared to others in your tax bracket - your tax return might be flagged for an audit. To help in avoiding a tax audit keep honest on your tax return and do not exaggerate any numbers. When ran through the discrimination index function you want your return to show up normal comparisons.

There are many things you can do to avoid tax audits. For example, first and foremost, keep track of all of your income. Keep copies of your W2's and 1099 forms, all receipts and any financial information that is relevant to the information submitted on the tax return. Keep all of this information organized, categorized and separated into specific years. Also, if you had help in preparing your return keep track of the contact information of the preparer that assisted you on the tax return. All of these above mentioned tips might not completely help you to avoid a tax audit but would surely be of help if you were chosen for an audit.

If you claim deductions instead of taking the standard deduction, any itemized listings that are exceptionally high for your income range might alert your return for an audit. To avoid a tax audit, keep honest and accurate with all of your charitable contributions especially. For example, please do not state that you have contributed $15,000 to a special organization if your annual income is only $35,000. This is not an action that someone would take it they are trying to avoid a tax audit.

to be continued

About the Author
Lydia Sweet is a contributing tax preparation expert for http://www.taxadvisr.com and has been working in the tax preparation field for 13 years. taxadvisr.com is a resource site for those preparing their federal and state income tax returns. Free E-File software, discussions, articles, reviews, forms and more can be found at http://www.taxadvisr.com