Worried About An Audit? 4 Ways To Avoid An IRS Audit
The only thing worse than owing money to the IRS is being selected for an audit. This is particularly true if you aren't sure how well your taxes were prepared in the past. If you've been chosen for an audit, don't ignore the notice. That will only make things worse. If you haven't been chosen for an audit, you might be in luck. With some careful planning, there are some steps you can take to reduce your chances of being audited.
File Your Taxes
If you have years of unfiled tax returns, file all your back taxes at the same time. Your return is likely to raise red flags if you suddenly file a return after years of inactivity, especially if you've had a steady income. It's important to note that if you haven't been required to file – such as if you've had no reportable income – you won't need to file back tax returns.
Take Steps if You're Self-Employed
If you're self-employed, you're already susceptible to an audit. The easiest way to protect yourself is to incorporate your business or file the papers to become a limited liability company – LLC. Corporations and LLCs are less likely to be called in for an audit. To protect yourself in an audit, be sure to keep meticulous business records, including all receipts pertaining to the business.
Stay Under the Radar
The last thing you want to do is draw attention to yourself. An amended return gives the IRS one more opportunity to go over your return with a fine-tooth comb. To reduce your chances of being chosen for an audit, try to avoid filing for an amended return. If you do have to file an amendment, be sure to include documentation for every change you need to make.
Avoid Blank Spaces
Blank spaces on a tax return raise red flags. When you're preparing your taxes, be sure to fill in every space on the forms. Even if you have to fill in the blank with a zero or a dash, do it. Filling in every space will reduce the chances of IRS workers making assumptions about what should have or could have gone there.
The last thing you want is to have your taxes audited. You can protect yourself and reduce the chances of being selected by following the steps provided here. If you have further questions about your taxes, be sure to speak to a professional tax consultant.