There is no definite way to avoid an IRS audit. That being said, if you know the red flags for an audit you can do your best in becoming a victim.
During an audit the IRS is making a determination on whether or not your return(s) is accurate. Most commonly, deductions are looked at closely.
Here are several IRS audit red flags to avoid:
- Claiming too much in charitable donations will throw up a red flag in no time at all. While this is true, as long as you have all your receipts there is nothing to worry about. Make sure you always ask for proof of a charitable deduction. If you don’t have a receipt don’t claim it on your tax return.
- Are you self-employed? If so, the IRS is going to keep a close eye on your deductions. They know that self-employed professionals like to stretch the truth in this area, so make sure all of your deductions are 100 percent legitimate.
- Those who earn more than $100k/year are closely monitored. Of course, there is nothing you can do about this. You don’t want to make less money just so you can stay out of the eyes of the IRS – this does not make any sense.
- Any inconsistencies are going to trigger a red flag. Some of these are easy to avoid, some not so much. For instance, a name change is an inconsistency but in most cases this is not something that can be avoided.
- A large change in income. Maybe you earned $300k this year but only $100k last year. While there is nothing wrong with earning more money you should be well aware that this can trigger an IRS audit.
- Federal and state returns that do not match up. You don’t want to claim one income number on your federal return and another on your state return. This is going to look very suspicious in the eyes of the IRS.
To avoid an IRS audit you should attempt to avoid all of these situations, while also making sure that your deductions are accurate. On top of all this, be sure to save documentation to back up all of your claims. This way if you are audited by the IRS you can prove no wrongdoing. Remember that audits can go both ways and even if they do find something to use against you it could be possible to find something else to negate the effect. If you are being audited, consider getting IRS audit help.