An IRS audit is not something to celebrate. Most people cringe at the very thought of the IRS coming to sort through their tax forms. Most audits end up on the negative side for the taxpayer with a tax debt or back taxes being owed to the IRS. The best way to come out good with an IRS audit is to avoid one in the first place.
Avoiding an IRS Audit:
-Double deductions – it is an easy mistake to make but it will trigger an audit. Deductions taken on a Schedule C form cannot also be taken on the 1040 form.
-High charitable donations – often times anything over 20% of your income will send up a red flag to the IRS. If your charitable donations are higher then be sure that you have receipts to prove all of the donations that you deduct.
-Political contributions – it would be nice if everything could be counted as a deduction but it is not the reality of the IRS. Fees and dues paid to lobbying and political groups and money contributed to political campaigns are not deductions and claiming them as such is sure to bring the IRS knocking at your door.
-Schedule C Losses – if you are trying to deduct your hobby and claim it as a business then you better start showing a profit. Too many years showing a loss will cause the IRS to take a closer look at your situation.
-Income – higher income brackets tend to see the IRS auditor more than the lower income brackets. Keeping your income down may be one of the ways to keep the tax man away.
There is not a foolproof way to avoid an IRS tax audit. Hiring a tax professional to file your taxes is one way to help ensure that if you are audited you do not end up owing back taxes or end up carrying a heavy tax debt because of your returns.