How to Avoid an IRS Income Tax Audit

The best way to handle a tax audit from Uncle Sam is to avoid one from the start. That's because even if you win a battle with the IRS, an audit can be annoying and unnerving. At the very least, it will cost you a great deal of time. Use a checklist to help reduce the probability that you will be contacted by the IRS.

Instructions

Difficulty: Moderate

1. Maintain a low-audit profile. As you approach this year's tax filing deadline, consider ways to avoid catching the eye of the IRS so that your return passes through the IRS processing machinery without a glitch.
2. Be accurate and avoid any mistakes on your tax return. Math or other mechanical errors (or forgetting to sign your return) are sure-fire ways to get your file pulled for closer scrutiny. Double check all figures.
3. File your return correctly the first time. Amended returns are carefully reviewed.
4. Prepare your tax return in a professional manner. It should look like it has been done with care and thought. If you do your own taxes, make sure all information is legible. Avoid cross-outs, erasures and white-outs. If it looks sloppy, as though you threw it together in 20 minutes, it will be double checked by the IRS.
5. Avoid unusual positions. Remember, ALL returns are looked at by an Internal Revenue Service processor, even if only briefly. Don't give this individual reason to pause and ask: "What the heck is this?" If you have an unusual item or an expense that's high, attach copies of canceled checks or a letter of explanation. Don't make the IRS come to you.
6. Take reasonable deductions. Don't get greedy by taking tax deductions that may be questionable, unless you are prepared to defend them. The watchwords are "reasonable and relative" in relation to income. If you earn $165,000 and claim $125,000 in deductions, don't be surprised if the IRS requests a meeting.
7. Respond promptly if you get a notice from the IRS requesting more information. These are fairly routine and not cause for alarm ... unless you disregard them. They are usually very specific in nature. Respond in writing, providing complete details and explanations.
8. Be honest. No one enjoys paying taxes, and the IRS knows it. Penalties for oversights can be stiff. When in doubt, err on the safe side, or seek the advice of a tax preparer.

Tips & Warnings

• Do a practice return first, then transfer the information to the one you'll submit.
• If you end up in a dialogue with the IRS, send written responses by certified mail with a return receipt requested.
• If you talk to someone by phone, get his or her name and write a follow-up letter. Verbal promises and agreements are worthless. Get everything in writing.