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Lower Your IRS Audit Risk Before Filing Your Tax Return With These Tips

February 19, 20243 min read

Introduction:

As tax season approaches, the thought of facing an IRS audit can be daunting for many taxpayers. While no one can guarantee immunity from an audit, there are proactive steps you can take to lower your risk. This article will outline key strategies to help you navigate the tax filing process with confidence and minimize the chances of attracting unwanted attention from the IRS.

Tax Tips

1. Check Your Numbers:

Math errors are a common trigger for IRS audits. Whether you're using tax software or seeking assistance from a professional, it's crucial to ensure the accuracy of all numbers on your tax return. Take the time to review information forms and self-prepared spreadsheets meticulously to avoid discrepancies that could raise red flags.

2. Don't Skip Forms:

The IRS conducts thorough forms-matching, comparing information reported on your tax return with third-party documents like Forms W-2 and 1099. Failing to include all sources of income, such as earnings from a side hustle, can increase your audit risk. Be diligent in gathering all necessary forms before filing to prevent potential issues.

3. Be as Normal as Possible:

Avoid irregular data patterns on your tax return, as they may invite scrutiny from the IRS. Whether it's charitable donations exceeding reported income or inconsistent home office deductions, strive to maintain consistency and accuracy in your filing. Comparing current and previous year returns can help identify any discrepancies that require clarification.

4. Double-Check Social Security Numbers (SSNs):

Transposing numbers in SSNs can lead to significant errors and potential audit triggers. Ensure accuracy when entering SSNs, especially for dependents claiming tax credits. With recent legislative changes emphasizing SSN requirements, attention to detail in this regard is paramount to avoid unnecessary IRS scrutiny.

5. Communication is Key:

For young filers, seeking guidance from parents or guardians can prevent filing errors and inadvertent duplicate claims. Open communication can help resolve issues promptly and prevent complications that may affect both your and your parents' tax returns.

6. Be Thoughtful About Credits and Deductions:

While tax credits and deductions offer potential savings, eligibility criteria must be met to avoid audit risk. Refundable tax credits, in particular, warrant careful review to ensure compliance with IRS regulations. When in doubt, consult a tax professional to clarify eligibility and maximize legitimate tax benefits.

7. Maintain Balance in Reporting Income and Losses:

For businesses and individuals alike, accurately reporting income and losses is crucial to avoid IRS scrutiny. Excessive losses relative to income may raise suspicions of irregularities. Strive to achieve a balance between deductible expenses and taxable income to present a realistic financial picture to the IRS.

8. Avoid Extreme Income Levels:

While both low and high-income taxpayers face audit risks, extreme income levels can attract additional IRS scrutiny. Strive to maintain a reasonable income profile and engage in tax planning strategies to optimize your tax position while minimizing audit risk.

9. Avoid Fabricating Numbers:

Fabricating expenses or deductions is a surefire way to invite IRS scrutiny. Even seemingly minor discrepancies can trigger audits, making accuracy and honesty essential in tax reporting. Keep detailed records and refrain from inflating deductions to avoid potential penalties and legal consequences.

10. Exercise Caution with Tax Strategies:

Beware of dubious tax strategies promoted on social media platforms, as they may not withstand IRS scrutiny. Exercise discernment and consult reputable sources or tax professionals before implementing any tax-saving techniques. Remember, adherence to tax laws and regulations is paramount to avoid audit risk.

11. Rectify Errors Promptly:

In the event of filing errors, don't hesitate to file an amended return to correct inaccuracies. Addressing mistakes promptly demonstrates diligence and transparency, reducing the likelihood of audit-related complications down the line. Embrace the opportunity to rectify errors and maintain compliance with tax laws.

Conclusion:

While navigating the complexities of tax filing can be daunting, proactive measures can significantly reduce your audit risk. By following these tips and maintaining accuracy and transparency in your tax reporting, you can file your returns confidently and minimize the chances of facing an IRS audit. Remember, diligence and attention to detail are your allies in safeguarding your financial interests during tax season.

Tax audit riskIRS audit preventionTax return accuracyTax deduction eligibilityTax filing best practicesTax planning strategiesTax filing tipsTax audit triggers
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Edward Malekan

Founder and CEO of Eternity Financial Alliance. My journey in the finance and insurance industry has been fueled by a strong desire to be a trusted resource for individuals, families, and businesses seeking to secure their financial futures.

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