| Everyone has heard horrible stories about people | | | | account this is a big red flag to them. Even if there is a |
| getting audited by the IRS and the IRS wasting a lot of | | | | legitimate reason for sending money overseas the IRS |
| their time for tiny mistakes or the IRS forcing the | | | | will investigate, so be sure to keep good records of |
| taxpayer to pay much more in taxes than they | | | | any transactions that are being done. |
| already paid. Statistics show that only about 1% of tax | | | | 4. Don't round your numbers: Rounded numbers is an |
| returns get audited in a given year, so if you think | | | | instant flag to get a tax return looked into further. The |
| about it, it is more likely than not that you will get | | | | IRS knows that the likelihood of you having deductions |
| audited in your lifetime. Below are the top ways to | | | | that are rounded off to the nearest thousand or |
| keep your risk even lower for audits. | | | | hundred is extremely unlikely. The IRS knows that |
| | | | people that don't have exact records for their |
| 1. Don't prepare your return by hand: Preparing your | | | | transactions just take guesstimates on some of the |
| tax return by hand can easily lead to math errors or a | | | | deductions or income numbers on their tax return. Be |
| return being too sloppy for the IRS computers to read. | | | | sure to use accurate information and avoid rounding. |
| If the IRS computer doesn't understand what is on the | | | | 5. Be careful with business deductions and schedule C |
| return then an IRS employee will manually look at your | | | | filings: If you own a small business and file a schedule |
| return. Whenever you have an actual person looking at | | | | C, this will significantly increase your chances of an |
| your return, the chances for an audit significantly jump. | | | | audit. Over the years people have abused many |
| It is suggested that you use tax preparation software | | | | deductions, so the IRS keeps a close eye on this. One |
| or use a tax professional to help you file (who most | | | | of the major things that they watch out for is the |
| likely uses tax software as well). | | | | home office deduction. If you do have a legitimate |
| 2. Make over 100K a year: This is one of those things | | | | home office, be sure to keep all proper records to |
| that you can't help, but it is good to know that once | | | | legitimately backup your deductions. Also, if you do |
| you pass this point your chances of an audit are | | | | have a small business, consider setting it up as a |
| significantly higher. If you do make over 100K a year, | | | | different entity so expenses won't flow through your |
| be sure to keep detailed records because the audit | | | | personal tax return. Partnerships and SCorps are must |
| rate of 100K+ people is about double that of under | | | | less likely to get audited and the IRS doesn't look into |
| 100K. This makes sense financially for the IRS to | | | | business expenses that are being flowed through |
| pursue these people because they pay more than | | | | these entities as much as personal tax returns. An IRS |
| 60% of the taxes in the United States. | | | | audit is a big hassle for anyone who encounters one |
| 3. Don't use foreign accounts: If the IRS sees money | | | | and can be costly. Keeping these things in mind can |
| being transferred overseas or to some kind of foreign | | | | significantly decrease your chance of an audit. |