You've undoubtedly seen advertisements promising to fully protect you from an IRS tax audit if you take specific steps. If you believe that you can fully escape a tax audit, sit down and take a deep breath because stopping one is practically impossible. Nobody can guarantee that you won't ever be inspected because, despite the fact that the majority of audits are planned and directed, a tiny portion of audits are performed at random. Just so you won't be that worried, the audit rate is not high, generally less than 1%. For instance, the overall percentage of tax forms that were audited in 2015 was 0.7%.
However, even if your tax return appears to be nearly flawless, there is a slight chance that you will be edited randomly. It takes a lot of bad luck, but bear in mind that there are some specific variables that can increase your odds of not being chosen for an audit. In some circumstances, minor changes will be sufficient to keep you out of the collection of audited statements.
1. Store your receipts
Keep detailed paperwork of all your expenditures and earnings. You can reduce the likelihood of an IRS audit by saving all receipts and filing a full tax return with accurate numbers. Additionally, bear in mind that based on your financial circumstances for the year and the statute of the limitations expiration date, you must save all of your receipts for a reasonable period of time.
2. File your tax return
You'll be audited if you don't file your tax report. File your taxes, even if you're just getting started, and your company isn't yet making money. If the government doesn't hear from you, they might assume that you are engaging in tax evasion. Additionally, do not fill out your tax return late to avoid incurring financial penalties.
3. Stay away from the sole proprietorship qualification
Tax breaks for small companies can be quite substantial. However, organizations identified as being owned by a single proprietor significantly raise their risk of being audited. Stay away from this group as much as possible, and fill out your taxes as a corporation or a society.
4. Avoid rounding the figures
The IRS pays close attention to rounded numbers. You won't always be able to spend precisely $500, $900, or $1,500 on products and services. In that case, make sure you add every cent to the amounts listed on your tax return.
5. Be careful with numbers
Simple arithmetic mistakes could let the IRS plan an audit for your company. Make sure the overall amount of the losses or profits are accurate when you file your tax return. Any error, no matter how minor, can raise questions. The IRS receives the most reports of mathematical mistakes each year. Math is the first thing the IRS pays attention to, making it one of the easiest to spot.
Then, prepare your tax return carefully, paying close attention to the small print and double-checking everything to prevent what appear to be harmless math errors.
6. Remember to sign your tax return
If you fail to sign your tax return, the IRS may conduct a more thorough review to look for other mistakes that may have resulted from your inattention to detail.
7. Avoid reporting less income
You must disclose all the profits of your company during the year. You will be required to pay back taxes, plus interest, and will be fined if you conceal some revenue from your tax return and the IRS discovers it. When you consistently document losses in your business or when your deductions consistently outweigh your income, it is a sign to the IRS that something unusual is occurring.
8. Sustain the deductions
The IRS is aware of the typical earnings and costs for various kinds of companies. A problem with your tax return may be indicated by abnormally high or low earnings or higher-than-average expenses. If you want to submit discrepancies like these, you need to have the documentation to back them up. In the same way, the Internal Revenue Service carefully examines entertainment and travel expenditures, so you'll need all the invoices and other supporting documentation to show that these are required for the efficient operation of your company.
9. Make sure the social security numbers are correct
Make careful when entering the social security numbers. The IRS may become aware if someone is listed as a dependant with a false social security number. Typing too fast can cause you to mess up the numbers. Additionally, jotting down or attempting to recall your children's Social Security number could lead to mistakes. Check carefully before putting this information down.
10. Be thorough every step of the way
Fill out your tax form thoroughly. Keep all papers and report all income. If you become stressed during the process, hire a professional to help you collect papers and fill out forms. For a very long time, audits have been and will remain a crucial component of the tax collection process. The secret to preventing an IRS audit is to prove your revenue and deductions. Simply put, state the truth on your tax return.
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