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It has been a hectic business week and you have put together plans for a small weekend getaway to calm your nerves in preparation for yet another successful albeit stressful week. A minute after daydreaming, you open up your mail and there lies the dreaded IRS audit letter. With your weekend in absolute shambles, you have to hurriedly take action and resolve your records in preparation for well, something you never planned for.

Statistics based on thoroughly researched data indicate that only 1% of businesses or individuals are liable to get an audit on their tax returns. However, these seemingly tiny odds increase by a huge margin of you fail to adopt the helpful tips stated below. Remember that it is nigh impossible to completely avoid an audit but these tips will greatly reduce your chances of getting an IRS audit notice and subsequent in-person audit.

What is an IRS audit?

It is necessary to understand what an audit is as well as how it works so you can better circumvent the hassle of dealing with them. An IRS audit is a review of an organization’s or individual’s income and accounts to make sure that information is reported correctly in accordance with the tax laws governing payers and to verify that the reported amount of tax is correct. Audits are majorly sent out when the IRS computer system notices an anomaly in your records or information. Bearing all this in mind, let’s move to the tips that will help you reduce your chances of getting a tax audit;

Go digital and file your papers online.

The world has adapted incredibly to machines and the obvious benefits they provide. Discarding that paper-based report and opting instead to send your records electronically, allow for a lesser margin of error as well as added protection when compared to filing them in hardcopies. The IRS even states that 21% of the papers filed have errors, compare that to the meager 1% that digitally filed reports have and the decision seems almost too sensible to pass on.

It is, in fact hugely economical as filing your tax online saves you the time and effort wasted on submitting them physically typically allowing you get your refund check far earlier so it’s really not a debatable compromise.

Check, double-check, triple-check those deductions.

Always be sure to double-check your figures when preparing your report making sure that your figures match those on forms submitted to the IRS by employers as their program simply matches them up and looks for discrepancies.

One has to also be careful to follow deductions with adjusted overall income limitations, the likes of medical expenses. You are unlikely to be audited for harmless math errors, but you should not take it for granted so as not to put yourself in any suspicious standing with the IRS

Even in cases where an IRS audit might seem totally random, the IRS actually uses the (DIF) Discriminate Income Function, a software that compares people’s deductions with yours. if you are in similar income bracket to flag potential audits. This means that you should be careful when dealing with deductions, in particular, make sure you have everything properly documented and stay clear of approximated figures or miscellaneous deductions. While this tip may encourage you to skip out on some deductions, It is highly recommended you do but have excellent documentation to back them up.

Extra care when dealing with figures.

Taking extra precautions cannot be overstated especially when regarding your figures. Being extremely careful with the process helps provide ample security. Make sure your state tax returns match your federal returns. Answer every question and don’t leave anything open to interpretation, taking steps like filling every space is worth it as a blank space could be picked up too. In any event, where you perceive that your numbers are likely to raise an audit flag, it is really helpful to include extra information and details in the form of extra forms, worksheets, receipts, etc. Use these items to explain figures that might appear inconsistent from previous or the current years’ returns especially in areas such as deduction amounts, your dependents and of course income.

A close example might be in an event where your deductions appear significantly higher than those of previous years, include a detailed explanation as to why or add copies of related documents. While the DIF system is still likely to flag that report, a human IRS agent can look into those additional forms and then decide that the disparity between your deductions has been properly reported and therefore undeserving of an audit. Other examples of the most common IRS audits are medical expenses, bad debt expenses, casualty losses, business travel, meal, and entertainment expenses. In any case, where you have any of these it is incredibly important to have proper documentation explaining those instances properly.

If you are self-employed, make sure to indicate it.

If you are a self-employed taxpayer filing a Schedule C will, of course, raise the risk of an audit. Note that cash businesses, doctors, lawyers, accountants and the like have higher chances an incurring IRS audits. The IRS has been noted to have a knack for singling out small to medium scale businesses so you should know if you are a likely target and act accordingly; keeping accurate records is an absolute necessity and it might be worthwhile employing someone skilled to take care of the financial books. It is also advisable to consider incorporating your business or forming a limited liability company (LLC) as corporations and LLCs are given IRS audits far less frequently and they also allow for greater deductions.

File your reports accurately and at the appropriate time.

The entire point of following these tips to the letter is ensuring the system doesn’t pick you up or any inconsistencies in your reports so it’s best to lay as low as possible. Being inaccurate in your report is an absolute must but in any case, where there are little discrepancies in your report filing for an amended return won’t necessarily clear you from being picked up. When you file an amended return or male amends to your original return, the first report will most likely also be subject to further checks. It will generally be in your best interests to file correctly and only once.

There are some tax advisors and tax lawyers that recommend filing at a later time, others stretch that and state that you can even drag it a little bit further with the claim that most returns are already selected for auditing in a given tax year by the latest extension deadline of October 15th and so filing for extensions will greatly reduce the risks of getting a tax audit. It did important to note on important caveat though, the moment you owe taxes you are expected to pay on the 15th of Apr or receive penalties for not doing so timely. In events where you are not sure of the amount you will owe or owed or on the occasion you don’t have your tax readily available, sending along a check for a part payment along with a timely filed return will show a promising change and also reduce future tax penalties. Even if you don’t have any of the previously stated issues filing your report sooner than later helps you get refund checks quickly.

9. Be exact and be neat.

It’s often said that the devil is in the details, and for the IRS, the reason for an audit may simply be an empty space. Answer each question and fill up every line, even with just a zero or dash. Leave nothing to assumption.

Following all the tips stated above should greatly reduce the risk of getting flagged or even receiving a tax audit by a large margin. You can be at rest knowing that the risk of landing yourself in a hassle just as you’re about to take that weekend off is closer to zero. However, know that this doesn’t completely exempt you from the possibility of getting an IRS audit. It is also worth remembering that clean, clear and error-free records help negate an unnecessarily long audit, having those numbers stay accurate help a lot when you’ve been contacted with an audit letter. You should also contact us at Cumberland Law Firm, LLC. Our tax lawyers have helped hundreds of individuals and businesses solve IRS and State tax issues. We are more than capable of handling sticky IRS audit situations quickly so it doesn’t cause a noticeable interference to your work or business.