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Ways to Help Avoid Audits
 
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Ways to Help Avoid Audits
“Oh boy... tax time again! (Groan) Where are my receipts... my W-2’s, etc.”. Sound like you? Hmm.
Number one on my list of ways to help avoid audits - get organized! Try to put all of your tax information in a filing cabinet or box. This will not only save you stress but will save you money, especially if you have to have your returns redone because you forgot part of your tax records. Having your information organized will also help you in the event that you get audited.
How likely are you to be audited?
Good news—unlikely! Even with the new technology including electronic filing, the volume makes thoroughly checking each return impossible. According to the IRS, in 2003, they received almost 131 million individual returns, of which they audited 849,000... approximately ½ of 1%1. Bad news - we all have the chance of facing an IRS audit... some of us a higher chance than others such as:
  Self-employed folks
  Businesses with few employees but many independent contractors
  Businesses with heavy travel and entertainment expenses
  Individuals deducting large amounts such as house mortgage interest with little income
The IRS calculates probabilities of incorrect information as well as the probability of unreported income. This leads me to number two: report ALL taxable income!
Number three is simply to remember to SIGN THE RETURN! It is unreal how many folks forget to sign their returns which can cause an IRS red flag. The Memphis Tax Lady marks with a red pen where a client is to sign and date their returns helping to avoid this problem.
Number four... the IRS pays attention to simple math mistakes and sloppy returns. A professional tax preparer (like MTL) will make sure that your tax forms are accurate, neat and organized. If despite everything, you are audited—seek a professional like MTL. Whether or not MTL prepares your return, you should always have a tax professional go with you to the audit and talk to the auditor on your behalf. In the unlikely event you have an audit and MTL has prepared your return, Memphis Tax Lady will go with you to the audit. Remember... it is not unusual for an IRS audit to occur one-to-two years or more after your original return has been filed. MTL is open year round and is available if you need assistance.

Sources for this article include:
Kramer, Hilary (2006). Eleven Simple Steps to Avoid an IRS Audit. AOL Money & Finance Retrieved June 21, 2006 from http://money.aol.com/investing/hilaryonstocks/canvas/_a/ eleven-simple-steps-to-avoid-an-irs/20060131224809990001
Buela, Cassandra (2006). In the Crosshairs—Does the IRS have you in its sights? PA Business Today Retrieved June 21, 2006 from http://www.dgs.state.pa.us/bcabd/lib/bcabd/bulletins/Apr2006.pdf
1Internal Revenue Service Data Book 2003.