Avoiding an IRS Audit
While there is no single magic bullet to avoid an IRS audit, following several tips from a tax attorney can help reduce your odds of an audit of your 1040 personal tax return. First, it is imperative that your math is correct on your return. Check and double check your figures. If you don’t, the IRS will.
You should avoid round, solid numbers on your tax return.
Always e-file or mail your return certified mail, return receipt and write the tax period and tax form on your green card so you can prove the IRS received the return. The IRS loses many returns costing taxpayers billions in penalties. Don’t be a victim to IRS incompetency.
If you are self-employed, form a business entity and elect to be taxed as a corporation (preferably an S-corporation in many cases). By doing so, you will avoid filing a Schedule C with your tax return, a juicy nugget the IRS enjoys auditing. By filing a Schedule C, the odds of an audit increase substantially.
Be certain that all of your 1099 income is reported. This is a major cause of IRS notices and ranks as a top reason for audit that we see in our Dallas tax attorney practice.
Always maintain a mileage log and keep your receipts of travel expenses. Part IV of Schedule C Line 47 asks if you have evidence to support your business expenses on your car. It follows this with a question asking if your evidence is in writing. To answer “no” is an invitation to an audit.
Do not automatically amend your previous returns at the sight of an error or lure of a refund. Do a cost benefit analysis before filing an amended return, as a 1040X may cause your original return to be pulled for closer scrutiny.
While no return is completely audit proof, following these steps may help reduce your odds. In the event you are chosen for an IRS audit, do not panic. Call a Tyler tax attorney immediately to represent you before the IRS during and after the audit process.