Exploring Audits

compliance auditing

An audit is when the IRS decides to re-evaluate someone’s tax return because of the possibility of an error. The IRS says that people are chosen to be audited at random by a computer program. This computer program chooses returns based on the likelihood that that return has some sort of error on it. How do you avoid problems? How can you prevent issues other than compliance auditing that you may be trying to deal with?

Try not to be too worried about the whole thing. The statistics related to you getting chosen are quite low if you’re an average, middle class professional that makes between $25,000 and $100,000 a year. If you make more than $100,000, your chances of being audited are a lot higher – it’s estimated that more than 50% of people that get audited make at least $100k, and if you make in the millions, you’re pretty much guaranteed to be audited.

So, how do you avoid getting picked? There is no sure-fire way to totally avoid an audit. But, here are some things that you can do to make your chances even less than they already may be.

–    Don’t deduct too much – too many deductions will catch the audit bots’ attention.

–    Log everything for company car costs and whatever you’re doing with your personal vehicle for work purposes.

–    If you are receiving or paying alimony, the computer now matches your former spouses’ claim with yours.

–    Double check the math that you’ve done. Math mistakes won’t raise huge red flags, but people who have math mistakes are more likely to be audited than those who don’t.

As you can see, there are a few ways to prevent problems with audits. Look at what you can do, find out what matters most and see how you can make that process a little easier for yourself when all is said and done.