Wednesday, 10 October 2012

5 Tips to Avoid an IRS Audit

5 Tips to avoid an IRS Audit In the U.S., the Internal Revenue Service (IRS) is responsible for collecting all federal taxes owed based upon income. Whether you do your taxes yourself or you have someone else prepare them for you, there is always the risk of an audit. While small business owners, sub-contractors and those who are paid on a cash basis are typically the target of audits, the truth of the matter is -- anyone can be audited and you’d be surprised at just how many regular people the IRS audits in any given year.

There are several ways that you can audit proof your tax return, sleep easy and know that your audit risk is tolerably low.

Check and Recheck Your Figures

No one really enjoys doing their taxes and it’s all too tempting to rush through and try to get it done as quickly as possible -- particularly if you have procrastinated and you’re staring down your deadline. This is a huge mistake. Take the time to go over your figures and double check everything. It may take a little more time right now, but it will save you time and a lot of stress later.

Avoid Bad Deductions

You've heard the stories about people who try to deduct dog food as a business expense. Don’t be that guy. Tax deductions are complicated and the rules change every year. Always ask a qualified tax professional about your deductions before you set them in stone. The last thing you need is to make a mistake here and end up having your or your company’s tax returns from the last few years audited.

Choose Your Tax Preparer Wisely

Not all tax prepares are created equally and not all of them are honest. Yes, you might be happy that they saved you X amount of money on your tax bill, but if they are shady, you will be spending a lot more time and money later. Always seek the advice of a tax professional who is licensed, experienced and qualified to help you. Your good friend’s cousin that swears they've never had to pay taxes is not the person you want to have doing your taxes for you.need to report that as income as well. Remember, they can always check your figures against the amount your spouse deducted from their taxes.


Always Err on the Side of Caution

The IRS is not an entity to mess with. In the grand scheme of things, you may save a few hundred or thousand dollars when you send in your return, but you’ll end up having to pay it and more sooner or later. Tax fraud is fraud no matter how you slice it or how well-meaning you are. Always err on the side of caution and avoid the temptation to deduct more than you should or claim less than you should. Honesty is always the best policy, but when you are dealing with the IRS, it should be your only policy. If it is too late to avoid the audit, there are several installment payment plans available. One of the solutions is Offer in Compromise, which is similar to debt settlement in that it allows for debt forgiveness. As mentioned before, seek the advice of a tax professional if you run into any unfamiliar issues.

Peter Martinez is a contributing writer with America’s Debt Help Organization- Debt.org.

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