Avoiding the Ever Feared Audit

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Being audited can be time consuming and nerve wracking. The IRS does not have the man power to audit more than about 1% of all individual tax returns on an annual basis. To figure out who they are going to audit, the IRS has some red flags that will pretty much guarantee an audit. These are some reasons that you may find yourself audited by the IRS in 2013…

1. Making more than $200,000 in a year. Interestingly, those that make more than $200,000 have a 3.93 chance of being audited and those that report an income of $1 million or more have a one in eight chance of being audited. When you make more than $200,000 or more than a million dollars in a year, you should make sure your finances are spick and span.

2. Reporting an incorrect figure for your taxable income. The IRS will get a copy of all of your 1099s and your W-2s. A simply computer program will compare what you report to the documents that are received, if the figures don’t match up a red flag is put next to your tax forms.

3. Filing for a large charitable contributions deduction. A simple formula that the IRS created will show what an average charitable donation is for your income bracket. If you exceed this donation, a red flag will be raised.

4. Claiming the home office deduction is a great way to win the “audit lottery”. You should be prepared to back up every single deduction with the proper documentation. This way, you can be sure that you have nothing to worry about should you be audited.

As you get ready to submit your tax forms, it may be beneficial to consult a professional with any questions that you have. This way, you can be sure that you can minimize your chances of having to deal with an IRS audit.

Source: http://finance.yahoo.com/news/irs-audit-red-flags–the-dirty-dozen-194425903.html?page=1


Q: Why is it essential to avoid the possibility of an IRS audit?

A: Avoiding an IRS audit is crucial to prevent potential financial stress, legal complications, and the need for extensive documentation, making it important for individuals and businesses alike.

Q: What proactive steps can individuals and businesses take to minimize the risk of being audited by the IRS?

A: Proactive measures include maintaining accurate records, filing taxes accurately and on time, seeking professional tax advice, and staying informed about tax regulations and deductions.

Q: How can tax professionals and financial advisors assist individuals and businesses in reducing the likelihood of an IRS audit and navigating tax-related matters effectively?

A: Tax professionals and financial advisors can provide guidance on tax planning, deductions, and compliance, helping clients minimize audit risks and handle tax-related issues with confidence.

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