IRS Tax Audit - Steps For Prevention

By: D Dave
Submitted: 2007-01-17 16:16:44
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The odds are low that your Internal Revenue Service (IRS) tax return will actually be audited. As it is, it is virtually impossible for IRS to examine each and every tax return due to time and personnel constraints. Also, the greater your income, the more chances you have for being audited. After all, it doesn’t make financial sense for IRS to audit somebody’s tax return whose income is, say for example, $5000 per year.

Still, nobody is immune from IRS audits and the last thing you want is to spend your time and energy in your audit.

Here are some of the steps you can follow to minimize your chances of being audited.

1. Use a computer to prepare your tax return: Not only will your tax return look cleaner to read, but you will also minimize your chances of making a mistake on your return.

2. Always check your figures: Once you are done with your tax return, always make sure all the amounts that you entered in your tax return document are correct. If the amounts are not correct, it is always easier to fix the problem now than to hope that IRS won’t find out. Remember if IRS does find out, you will spend a lot of time and energy in fixing your problems.

3. Sign your return: Even though this is a no-brainer, many people simply forget to sign it. One of the most obvious reasons is that we spend a couple of days finishing and reviewing the tax return and in the end, we forget signing our own tax returns.

4. Use electronic filing: If you file your return on a hard copy, do remember there will be an IRS employee who will enter the numbers you provided in their computer system. Obviously, this is a time consuming effort. Also, the IRS employee himself can make a mistake when entering the data into the computer system. It is better to file electronically so that there is no margin for introducing errors.

5. Provide proof if you have large deductions: If you have a large deduction such as an expensive medical treatment, you can provide receipts, checks and medical bills. Large deductions can turn on the IRS audit flag and it is always good on your part to show as much proof as you can. You may use disclosure Form 8275 for this purpose.

6. Use care for business expenses : One of the biggest advantages of a business is that you can claim deductions. However, not every expense can be counted as a business expense. The laws can be complicated and it is always better to see a tax attorney for this matter.

The best step you can follow is, just be honest about your financial aspects. If you are honest, you don’t have to be afraid of anything if an IRS taxman knocks on your door.

Copyright 2006 Divyesh Dave

Divyesh Dave is an online entrepreneur and currently runs a financial based website. For more information, visit http://www.bajika.com and his financial blog at http://ezdough.blogspot.com/

Article source: Expert Articles

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