More than filing taxes, more than tax time itself, people dread getting audited. Both individuals and companies worry about the possibility of undergoing an audit, and the negative impression we all seem to have isn’t helped by movies and TV shows that make auditing sound like a disaster that will ruin your life. The truth is, audits usually aren’t that bad. In most cases an audit is prompted by a minor mistake that can easily be corrected. The IRS will usually give you a chance to correct any mistakes you make in filing your taxes, so most of us have nothing to fear from being audited.
There are, however, some ways in which you can reduce your chances of being audited. It won’t completely eliminate the possibility, since sometimes people are chosen for auditing more or less randomly, but you can reduce your chances by making some simple changes to the way you file your taxes. Most of the time an audit happens for a specific reason, so if you know what those reasons are you can avoid making a mistake that might trigger an audit.
How to Reduce your Chances of Being Audited
Reducing the likelihood you’ll be selected for an audit is easy once you know how. Use these simple tips:
Some say that filing later in tax season reduces your chances of being audited. This definitely isn’t confirmed though. If you’re getting a refund, it’s usually better to file earlier so you don’t have to wait too long for your check.
Check and double check your figures. One of the most common audit triggers is a mistake in your calculations. If you make an error your account will be flagged, and this may result in an audit.
Make sure you can back up the figures you supply. If you claim deductions for business expenses such as travel and equipment for example, you must have the receipts you need to back up those claims. Keep all of your receipts organized in a safe place so you’ve got them ready at tax time.
Remove any gray areas from your deductions list. If you’re not sure whether something you claim for will be approved, it’s usually wiser to forgo making the claim.
If you have a questionable deduction you really want to include, plan ahead and send your receipt when you file your taxes. If your deduction claim triggers an audit and you’ve already sent the receipt in, the IRS representative who looks over your claim may cancel the audit.
Bear in mind that you still have a chance of being audited even if you follow all these tips, simply because people are sometimes chosen for audit randomly. If this happens to you, remember that being audited doesn’t automatically mean you’re in trouble or will owe money, so try not to panic. Hire a professional to help if you need to, and make sure you communicate and cooperate fully with the IRS to keep the process going smoothly.