10 Strategies for Preventing an IRS Audit
 By
Alan L. Olsen, CPA, MBA (tax)
Managing Partner
Greenstein, Rogoff, Olsen & Co., LLP
Do you want an IRS agent to make a visit to your office? I don’t know many people
who do, but knowing strategies to prevent an unwanted visit could certainly save
you from an extra bit of stress in life. Only one percent of taxpayers yearly are
selected for IRS audits, but that number is increasing. Below are 10 strategies
that you can use in preventing the likelihood of being audited by the IRS.
- Avoid Fluctuations In Income
The IRS knows how much you live on and so if they notice a drastic change in your
income, they will most likely suspect that something was not reported.
- Report All Income
The IRS has access to quite a bit of information, so it is probably not the best
idea not to report some income. If they discover unreported interest, dividends
or miscellaneous income than you may not be heading down the nicest path. Keep in
mind that the IRS receives 1099s that you are receiving too.
- Abnormally Low Income
If your income is substantially lower than other individuals in your profession
than the IRS may become suspicious.
- High Income
If you have an income over $100,000, you may want to be extra cautious. IRS audits
are five times more likely to occur if you are in this income bracket.
- Don’t Round Numbers
Good record keeping will draw less attention from the IRS. When numbers are rounded
the IRS will suspect that errors could have occurred. For instance, reporting $1,978
dollars on meal expenses rather than $3,000 demonstrates that you are organized
and precise.
- Watch Your Number of Charitable Contributions
Charity is important, but be aware that a red flag may arise if you have made quite
a few contributions. Make sure to hold onto your receipts, if you are donating five
times as much as the average person in your income bracket.
- File a Complete and Organized Return
When the prepared return is sloppy or missing information, the IRS will be more
likely to target you. With technology today, returns are checked by a computer,
but if a computer can’t read the return than an IRS agent will have to. This is
where filing electronically comes in quite nicely.
- Be Careful with Deductions
The IRS knows the average percent of deductions for your income bracket. You are
entitled to the deductions that you have, but if they are more than the averages
you may draw attention to the IRS.
- Consistent Information on State and Federal Returns
If you are giving the IRS different information on the returns that you are submitting,
they may suspect that you are trying to hide something from them.
- Avoid Participation in Tax Scams
You should avoid participating in these transactions as they will only raise more
red flags in your direction.
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