Learn How You Can Avoid an IRS Audit

Feb. 16, 2006 — -- What can you do to avoid an audit?

First and foremost, obviously, you need to be honest. However, there are some things that you can do that will help your cause.

• Prepare your tax return by computer: Computer-prepared returns look neater and more official to the IRS, and lessen the chance of an audit. Programs such as Intuit's TurboTax and MacInTax can help you prepare your return.
• Do not use round numbers for deductions: Do not round off your deductions to make the numbers look neater. Round numbers make the IRS think that you are estimating things; you want to prove that you are keeping precise and accurate records.
• Limit itemized deductions: Although it is OK to itemize deductions, be careful about making large deductions that may seem irregular given your income bracket. And it is critically important to keep records of all your donations, so that you have proof if the IRS comes knocking.
• If you claim large deductions, provide proof: For large deductions, such as medical bills or expenses from flood damages, attach receipts, checks, insurance reports and anything else you have to prove their legitimacy.
• Ask for help if you need it: Tax professionals prepare all year for this season, so do not be afraid to ask for their advice. They can tell you what you are missing before the IRS does.
• Check your math: The IRS automatically corrects some mathematical errors, but that does not mean a return full of math errors will not be red-flagged. If you are filing paper returns, check your math carefully to avoid careless errors that could cost you later. Or if your math skills are lacking use software and or e-file.
• Prepare, but do not file early: Although it is a good idea to have your return completed early, the same cannot be said for filing early. By filing and paying your tax bill early, you are essentially loaning the IRS money that you might be able to otherwise grow. So, while you do not want to be scrambling at the post office on April 15, avoid sending your money in too early.