Tar audits are stressful, and when it is from the IRS, things get worse if everything is not in order. If you ask experts, there is no guaranteed way to avoid audits, but there are certain red flags you can avoid to reduce the chances of IRS audits. So far, the possibility of your small business tax return getting audited is very low.
According to a reliable source, IRS Tax Audit data indicates that only 140 partnership returns, out of 4 million in total, were opted for IRS audits in 2018. This was close to 0%. But in 2020, the IRS declared that it would add auditors to cater to more audits, which will increase by 50% by 2021. This means that your chances of being audited just went up.
Let’s now know how you can avoid IRS Tax Audit.
Always Be on Time
Some people feel that filing late for the taxes, even with an extension, is an ideal way to minimise your chances of having an audit. But if insights from the team of tax professionals (including an IRS tax attorney in San Diego) are to be believed, it is a big NO. It is important to always taxes on time. This will help you create a history of compliance, including all the ancillary returns like sales tax, payroll, etc.
Never Tale Excessive Deductions
This does not necessarily mean overestimating the extent of the donations. Also include not taking an excessive home office deduction or making excessive deductions for travel and meals. All these expenses and others such as medical expenses, casualty losses and bad debt are scrutinised with additional care. It is also advised not to suddenly add many deductions you have never taken previously. This gets you highlighted by the IRS.
Get Familiar With Your Rights
Check out the IRS Tax Audit Publication 1, which explains the Bill of Rights for the Taxpayers before you face an audit. Do proper research about tax legal issues with the help of IRS publications and other commercial tax guides available for free. I
In case you are still not sure about how to process or how to arrange your documents for the auditor, get in touch with a team of professional experts (including California tax attorney, auditors or counsellors)
Never Leave the Questions Blank
Every question on the tax form must have an appropriate answer, even if it answers to $0. Never miss completing every single line that makes sense to the IRS. Even a small unintentional oversight can get your return some additional attention from the IRS that you don’t want to have.
Honesty Makes You Win
Experts suggest that being 100% honest and truthful on the tax return is extremely important to prevent you from being audited. Reporting all the incomes, deductions, credits and other statistics accurately and realistically will keep audits at bay. Don’t forget to add all crypto transactions. Professionals from crypto accounting firm always emphasise citing all transaction details of cryptocurrency to avoid any contingencies.
Now that you know how to avoid IRS Tax Audit, make sure to deal with them diligently. And you can always seek help from the experts to resolve any problem coming your way. This way, you can have complete peace of mind and maintain a cordial association with the IRS.