Nothing instills more fear in the heart of every American than the words “You’re being audited!”  There are several simple things you can do to decrease the likelihood you will be chosen for audit.

  1. Double check math calculations.  Today most taxpayers use a tax software program but if you still prepare a manual tax return, double and triple check your math.
  2. Be sure to include all income.  The IRS computers cross check income with reports that are filed from banks, credit card companies, stock brokerage firms, etc.
  3. Deduct only charitable contributions you actually make.  The IRS knows this is a source of abuse by taxpayers.  Be sure to keep all receipts to back up this deduction in case they choose you to prove your generosity.
  4. Be sure your business income and expenses are legit.  Too many business losses on your Schedule C are a red flag.  The purpose of a business is to make a profit.
  5. Use exact numbers for deductions.  Too many round numbers such as 100, 350, 700, 200 make your deductions look like you made them up and will cause a red flag.
  6. Don’t be abusive with meals and travel in your business. Your numbers have to make sense.  The IRS has statistics that compare average expense margins in similar businesses.
  7. File your tax return! Nothing triggers a love letter from the IRS quicker than not receiving your tax return.

Since some IRS audits are chosen at random, there is no way to ensure you will never be audited.  Follow the simple steps above, keep accurate records and file a timely tax return and you will find yourself staying far away from the taxman!  However, should you find yourself under audit, the tax professionals at Johnson CPA are here to help.

Sandra G Johnson, CPA, EA, CFE