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Avoiding Audits as Best as You Can

Posted by msu on

Many people look at the word “audit” and get worried. The fact of the matter is, even the richest celebrities (which you can find on websites like http://richestcelebrities.bio) may have to deal with some sort of audit during their career, if not multiple times.

An audit is when the IRS decides to re-evaluate someone’s tax return because of the possibility of an error. The IRS says that people are chosen to be audited at random by a computer program. This computer program chooses returns based on the likelihood that that return has some sort of error on it. How do you avoid this?

First off, don’t be too concerned. Less than 2 percent of taxpayers get audited yearly. Most people (it’s estimated about half) who do get audited make more than $100,000 a year. So, if you make less than that, your chances of getting picked are greatly decreased. Make less than $50k a year? Your chances are even less (Oddly enough, the chances increase slightly when you make less than $25k, but the amount is insignificant).

So, how do you avoid getting picked? There is no sure-fire way to totally avoid an audit. But, here are some things that you can do to make your chances even less than they already may be.

1.    Watch those deductions. Not saying you shouldn’t take what you are entitled to; on the contrary. There are tons of deductions out there if you do your homework and figure out what you are eligible for. But, if you have a lot of them, your chances increase slightly for there to be an audit.

2.    Don’t forget your investments and other potential taxable income. If your numbers differ from the ones your bank or investments provide, it could raise a red flag to the computer system. Also, make sure you file each investment separately instead of making it one lump sum.

3.    Alimony. If you are receiving or paying alimony, the computer now matches your former spouses’ claim with yours. If they do not match, this could make you eligible for an audit.

4.    Check your work! Your math teacher wasn’t being annoying when they told you to do this. It really is important. Check your math; basic math mistakes won’t raise a huge red flag, but not having them just makes it less of a possibility.

5.    Company Car Costs. Do you use your personal vehicle for transportation for business and count them as a deduction? Make sure to log EVERYTHING, the mileage, the gas and receipts, the upkeep costs. Whatever you try to claim as business expenses, especially with a personal vehicle instead of a company one, it could possibly alert the computer system to get your claim checked out.


6.    Paid in cash? If you are self-employed, a small business owner, someone who works in a family business, or whatever else, you have a high potential of being audited. Why? Because those groups of people account for what is possibly over $300 million dollars in unpaid taxes in the past.