The IRS has recently cracked down on individual tax payers and companies alike. Trying to figure out where the tax “gap” is coming from.
This is especially true for those who make $1 million or more a year, those who are self-employed and those with unusual or complicated tax deductions.
The very best way to avoid an IRS audit is to simply use the services of an accounting firm. They can track your expenses throughout the year, which is especially important for those who own a business or are self-employed.
At the end of the year they can tally all of your work related expenses and help you to get the correct tax deductions. In addition, they can file your taxes for you, and most firms give a guarantee that they will be correct.
Below is a list of the top 5 things you can do to avoid an IRS audit.
1. Double check your numbers! The IRS found more than 5 million mathematical errors on tax returns last year alone. If the numbers aren’t correct, the IRS may think you are trying to de-fraud them.
2. If you are self-employed make sure you keep your receipts and track your business expenses. Be careful not to accidentally include a personal expense in your tax return. As someone who is self-employed there are certain things you can claim as a deduction.
3. Make sure you list ALL of your income on your tax return. If you work a full time job but also sell handmade items such as jewelry or soap on the side, you must report this income to the IRS.
4. If you are a bargain shopper and find the best deals on everything, allowing you to purchase things you wouldn’t be able to otherwise, don’t be flashy on social networking sites such as Twitter and Facebook about it.
If you do, make sure you include that you got a huge discount on it. And hey, it never hurts to show the receipt for proof. That way if the IRS does go digging into your finances, they won’t be worried when they see you paid 80% less for an item.
5. Make sure you explain any unusual tax deductions such as a very large charity donation of household and personal items. Just include a note explaining why the deduction was so large (i.e. liquidation of a deceased loved ones home)