Five Ways to Minimize Your Chances of an IRS Audit

"IRS Audit" - the mere words strike fear into the heart of many. No one likes the idea of being singled out by the IRS to go over your accounts with a fine tooth comb, and to top it off, there is little doubt that the whole, fun process will end with you writing yet another check to your tax collecting friends. While there is no way to guarantee you will always avoid an audit, there are steps you can take to minimize the chances of your number being called. Give these five tricks a try to help you stay hidden in the crowd.

The first way you can minimize your chances of an audit sounds obvious, but bears saying anyway; double check your work. If you have made a number of simple mathematical errors, then your return is going to stand out as suspicious. A completely innocent mistake can raise a lot of read flags. For instance, if you meant to claim a $500 charitable deduction, and you accidentally enter the figure as $5,000, with an income of $30,000 per year, alarm bells are going to be ringing. Even if the IRS eventually comes to the conclusion that this was nothing but a simple error on your part, the road to that conclusion is one you could have avoided traveling if you had double checked your work.

The next way to fly under the IRS radar is to structure your finances in a way that won't make them say, "Hey, tax man, over here." If you are self-employed or get paid in cash, this could mean you. Get the advice of a financial expert when doing your taxes, and make sure you return is above reproach. This tip is linked to our next tip, which goes for everyone: save your receipts. Save everything, in fact. For every penny you spend that is tax deductible, make sure you have a record of that expense. The IRS demands receipts for all tax deductible expenses over $75, and for expenses under $75, you must have a written record of your own providing as much detail as possible. If you don't have the receipts, don't try and claim the expense. If you are claiming a lot of deductions, then be prepared to answer questions.

The fourth tip for avoiding unwelcome IRS attention is to file right at the deadline. Don't send your return in when the IRS is twiddling its thumbs, looking for something to do (like pick apart your return). Get yours in with rush to decrease your chances of standing out. Of course, you can have your return ready to go early, but hang on to it, especially if you owe money. Never pay a tax bill early; you don't get any special credit for it; it's just a favor to the IRS. Do you really want to do that?

The last tip for deflecting an audit is to flag up potential problem areas in your return yourself, and send the documentation in with your taxes. If you started a business this year and have lots of related start-up expense deductions, send your receipts with the return so the IRS can check your return and move on.

These tips will help you avoid sticking out to the IRS, but the truth of the matter is, people are selected every year at random for an audit, and you can't control your audit potential completely. Stay prepared, and have your finances in order all the time, so if the IRS does come knocking, you can send them on their way with a minimum of fuss.

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