5 Ways Accountants Can Make You Audit Proof
Except for Scientologists, nobody will ever win a fight against the IRS. Going through an audit is awful and what specific factors to look out for isn’t certain. But there are things you can do to lessen the likelihood of interacting with the IRS. Here are 5 of those things.
5. Be ready to defend your deductions
The IRS is well aware that people will put deductions where they can. A good rule to follow is you should be comfortable defending your deduction if asked about it. Even if you are questioned about it, if you can reasonably prove why you listed it then it should not be a problem.
4. Get help
With a professional on your side to help you fill out your taxes, your paperwork should be solid and better organized. A professional is more familiar with the rules as well as location specific laws that apply to your situation.
If you don’t want to go all-in and hire a accountant or tax professional, you can get tax software to help fill out your taxes. Tax software will make things faster as it will do your calculations and offer helpful suggestions. You don’t even need to follow through and submit online if you don’t want to, you can simply print it out.
3. Disclose only what you need to
Giving out all the possible details can actually hurt you rather than help. You should keep things as simple and as clear as possible. If you need to append explanations, keep it concise and accurate. No need to include bank statements or sales contracts unless requested by the IRS.
2. Double check your math
With all the paperwork and tediousness of preparing your taxes, it’s understandable that a person slips and makes basic math errors. Simply checking if the math is correct is easy and can avoid trouble. The IRS will contact you if you make mistakes in your math. This is standard procedure and will not normally lead to an audit but it is in your best interests to keep interactions with the IRS to a minimum.
1. Keep track of all your 1099 forms
There are different types of form 1099. Here are a few examples:
Form 1099-R for pensions
Form 1099-INT for interest
Form 1099-DIV for dividends
Form 1099-G for tax refunds
Form 1099-MISC for miscellaneous income
Form 1099-MISC will see the most use. Be sure you organize and keep track of all the forms you have. Those who paid you will also submit forms related to you and these will be cross checked with your form 1099. Failing to account for something is a big red flag for the IRS.
On a final note: here are some known red flags that will definitely increase your likelihood of being audited:
Tax returns with very large deductions e.g. You report an income of $35,000 and claim $30,000 in deductions.
You claim several deductions with travel, ,entertainment and debt with poor documentation.
- You report long time recurring business losses. The IRS is suspicious of businesses that consistently lose money over the years and still stay in business.