How to Avoid a Tax Audit

One of the biggest fears when it comes to taxes is an IRS tax audit. Here's a few simple tips on avoiding a tax audit.


One of taxpayers’ biggest fears is being audited by the IRS (Internal Revenue Service). Even if you’re confident that you’ve filed your taxes correctly, in the back of your mind, you wonder when you’re going to receive a phone call or letter from an IRS representative. You can worry a little less this tax season. Here are some ways you can avoid a tax audit.

Certain types of taxpayers are more likely to be audited than others. These include taxpayers who make more than $200,000, small business owners and self-employed taxpayers, and taxpayers who could be hiding taxable income overseas.

One of the biggest triggers for a tax audit is having high deductions compared to other taxpayers within your same tax brackets. You can account for high deductions by attaching a receipt or other documentation to your tax return. While above average deductions can trigger an audit, being proactive and providing proof will reduce your chances of being audited. Don’t be afraid to deduct expenses that are legally deductible. Instead, make sure you can justify the amount of your deduction. Write checks whenever possible and keep a copy of the cancelled check in your records.

Double check your math. Addition and subtraction errors are common reasonsfor tax audits. They’re also easy to fix and avoid. Check and double check your numbers to make sure you’ve included the right ones.

Use tax preparation software. Tax prep software like TurboTax or H&R Block eliminates math errors that can lead to an audit. They can also do an analysis of your tax return to let you know any items that could trigger an audit. Be aware that even tax software can’t completely eliminate your chances at being audited since the IRS computers audit a number random taxpayers every year.

Make sure you report income and interest from any 1099s you receive. The IRS software does a check to make sure the income reports on the 1099s it received for your social security number matches what you reported. Discrepancies could trigger an audit. If you believe the amount on your 1099 is an error, contact the issuer to have it corrected. If that is unsuccessful, you should contact the IRS by calling 1-800-829-1040 for assistance.

Use a reputable tax preparer. You never know what type of reputation a certain tax preparer has built with the IRS. Your tax preparer should be experienced with filing the type of return you need. Find out that preparer’s audit record. Be wary of choosing tax preparers with high audit rates. Ask that your tax preparer not make assumptions or conclusions about your records. Instead, request the preparer call you with any questions.

File at the last minute. The IRS receives numerous returns on April 15 and can’t scrutinize them the same way returns filed on February 1 may be. That’s not to say you can avoid an audit all together by filing later. You just reduce the risk.

Report all sources of income including child support, alimony, and cash receipts. Child support and alimony received will be tied to your social security number, so the IRS will already know about it. Though you might think getting paid under the table will keep you from paying taxes, the IRS can find out about cash receipts. For example, if you deposit cash into your checking account, an audit will raise the question of where the deposits came from.

File your income taxes. No matter what you think or feel about paying taxes, you’re legally required to do so. Avoiding paying taxes is a crime and if you’re caught, you’ll face criminal charges and monetary penalties. On top of that, you’ll have to repay the taxes you should have paid during the time you avoided paying taxes. A good example of this was the singer Willie Nelson, who in 1993 had to pay $16 million to the IRS for evading taxes.