Robert J. Fedor, Esq., L.L.C.

Tips to avoid an IRS audit

Few unexpected events bring as much dread as an audit by the Internal Revenue Service. Often vilified, IRS auditors are notorious for finding errors in tax documents and forcing individual taxpayers and business owners to pay additional fines and fees. While there is no sure fire way to avoid being the subject of an IRS audit, there are some steps individuals can take to decrease the likelihood that their tax return will trigger an audit.

It's important for tax payers to understand what actions may signal a red flag to the IRS. For example, a taxpayer who reports more expenses than income is very likely to become the subject of an IRS audit. Likewise, individuals who claim large deductions are typically subject to increased scrutiny as are those with incomes in excess of $1 million.

To avoid being audited, taxpayers would be wise to take a close look at the amount of deductions they claim on their tax return. This is particularly true of small business owners who may have numerous business-related expenditures. While the majority of business expenses may be valid and appropriate, it often only takes a few questionable deductions to get the IRS's attention.

Taxpayers would also be wise to take steps to avoid underreporting income. The IRS relies upon its Automated Underreported Program system to assess potential cases of underreporting and tax fraud. This system uses third-party sources to determine if and where income discrepancies exist. Individuals found to be in violation of underreporting often face hefty fines and potential legal action.

Tax matters are often complex in nature. With so much at stake, it's important that individuals facing a potential IRS audit enlist the assistance of a tax attorney. A legal professional who is experienced in handling tax-related legal matters can assist with an IRS audit appeal and help provide for the best possible outcome.

Source: Fox Business, "What the IRS Doesn't Want You to Know," Kemberley Washington, March 20, 2013

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