10 Ways to Avoid a Tax Audit

10 Ways to Avoid a Tax Audit

We have culled together multiple lists to identify the top 10 ways to avoid a tax audit.  We will list our top 10 at the bottom of the article.  If you’ve never been audited by the IRS, you’re likely doing a lot of things correct. However, if you’re concerns that keep you up at night at the mere thought the IRS might choose you, there are some things you can do to help prevent, or at least decrease being selected.

Although, even if a tax return is completed 100% correctly, we routinely see ultra-high net worth individuals and families get audited more often than others.  The prevailing thought amongst auditors is likely, more wealth typically comes with more complex tax strategies and more opportunities to catch an error.

Tax Audit Tips From GROCO.com, here are 7 simple strategies for avoiding an IRS audit:

1. Tell the truth when you file your taxes
2. Get organized and keep detailed records
3. If you’re self-employed keep track of everything
4. Avoid unreasonable deductions and keep track of all of them
5. Try to avoid fluctuations in your income
6. Don’t make too many charitable donations
7. Let a professional prepare your taxes

From LegalZoom, here are 10 ways to avoid a tax audit:

1. Don’t report a loss
2. Be specific about expenses
3. Provide more detail when needed
4. Be on time
5. Avoid amending returns
6. Match up all your paperwork
7. Don’t use the same numbers repeatedly
8. Don’t take excessive deductions
9. Use Schedule C
10. Don’t leave questions blank

From Forbes, 10 Ways to Mostly Avoid a Tax Audit:

1. Check your math
2. Be as normal as possible
3. Double check Social Security Numbers (SSNs)
4. Call home
5. Go through your mail
6. Be thoughtful about your deductions and credits
7. Make money
8. But don’t make too much money
9. Don’t make up stuff
10. Fix your mistakes

From WSOC-TV, Charlotte, NC, 10 tips from Action 9 to Avoid IRS Audit as Tax Due Date Approaches:

1. Double check your numbers
2. Give the exact dollar figure
3. File electronically
4. Be careful claiming your car as your office
5. Accurate reporting of spending and earning
6. Be careful with medical and dental deductions
7. Report extra income
8. Claiming home office
9. Proof of donations
10. Earned income tax credits

Now, our recommendations are as follows:

1. Be honest, accurate, and tell the truth!
2. Get organized and keep detailed records (up to 7 years in most cases).
3. Avoid unreasonable deductions and income, see #1 above…
4. If complex, seek professional help (ounce of prevention = a pound of cure)!
5. File electronically
6. Plan ahead to reduce income fluctuations and surprisingly large donations.
7. Use exact numbers that tie to receipts, 1099 forms and anything reported to IRS.
8. Carefully consider the risk/reward aspect to all tax strategy decisions.
9. Double check numbers: math, social security, & bank account if filing electronically.
10. If self-employed, do all of the above but in greater detail, especially #4!

It’s impossible to completely rule out the possibility of an IRS audit, but by taking these measures you can greatly reduce your chances of being chosen for an audit. If you feel like the IRS might single you out for an audit, then contact the professional CPAs and tax advisors at GROCO for help.

We hope you found this article about 10-ways to avoid a tax audit helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Considerately yours,

GROCO, GROCO Tax, GROCO Technology, GROCO Advisory Services, GROCO Consulting Services, GROCO Relationship Services, GROCO Consulting/Advisory Services, GROCO Family Office Wealth, and GROCO Family Office Services.