Preventing an Audit

The word audit is dreaded by the masses. Every year the IRS is required to do so many audits. There is no way to guarantee that you will never be audited, yet there are many ways to reduce your chances. Overall, the more professional you are with your return the better off you are. The following are 10 tips that can minimize your chances of being audited.

Do an e-filing. If you must send your return through the mail send it certified mail with a return receipt requested. If your tax return is not received you automatically increase your chances of being audited.

Send all changes of addresses to the IRS. It is very common for new businesses to move around. If you don’t change your address there is a chance that you could miss notifications and even refunds that are sent to you.

Make sure your tax return is neat. When handled by a professional, returns are typed out and neat. When you file personally make sure that it is done the same way.

File all elections. Certain tax breaks and options require that you file them in election. Generally the best thing to do is attach separate statements for each election made on your tax return. This supports attention to detail.

Report all income. This sounds very simple yet many people fail to report all income and create a red flag.

Have your return prepared by a competent tax preparer. The signature of a CPA or tax attorney will help minimize the chances of an audit.

Break income and expenses into small segments. Income reported to the IRS on a 1099 should be separated from other income.

Keep records of expert advice. There have been cases where penalties have been waved based on a good faith reliance on an independent expert.

Sign your tax return. Failing to sign a return is one of the biggest red flags for an audit.

Double check your social security number.

For more tips on how to avoid audits please visit us at pfbs.com.