How to Prevent a Tax Audit
Many people are scared of tax audits. Horror stories abound as to what the Internal Revenue Service has done to people--seized all their possessions and sold them, or even worse, put someone in jail. Sending celebrities to prison for tax evasion is always publicized, usually around the April 15 tax time. But the fact is that only a tiny percentage of people are audited: Less than 2 percent of tax returns are selected for an audit. But there are a few simple things you can do to reduce your risk of being audited.
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Instructions
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File a joint tax return if you are married. One of the reasons is that if each spouse files an individual tax return, there may be duplicate deductions on each return. If you and your spouse file separately, you each increase your risk.
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Check your itemized deductions carefully. Each income bracket has average expenses as determined by the IRS. If you deductions are too high for the income you are reporting, the IRS will notice.
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Declare all the income you earn. Everything you make, whether in tips or other cash payments, must be reported on your tax return. Trying to hide income can cause problems.
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Have your paperwork in order. You should also have documents that prove your income, such as bank statements, brokerage statements or 1099s and W-2s. Everything you enter on the tax return needs to be documented.
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Recheck the math on the tax return. Even small arithmetic errors can put you at risk. The IRS checks your math and if there are errors may think that you have made other mistakes also.
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Sign your return. Something as simple as failing to sign your return can cause problems. Take a little more time and be certain that you have put your signature on the form.
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File your return. Some people actually forget to do this. While it is unintentional in most cases, this can also lead to a tax audit. Filing before the April 15 deadline also helps. Late filing could subject you to penalties and interest.
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Don't forget to include a check or money order. If you have made payment arrangements with the IRS, make certain that all the required forms are submitted as well.
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Tips & Warnings
Read IRS publications or visit the IRS website to learn how to properly prepare your tax returns (see Resources below).
