IRS Audit Flags

Root canals and IRS audits are 2 things that can make you cringe. You'll be able to avoid a root canal if you look after your teeth. Similarly, you'll be able to steer clear of an IRS audit by steering clear of particular practices and take care of your financial health. The IRS may need to audit you if several red flags appear.

The IRS determines the accuracy of your tax returns in an audit. You must be able to prove particular deductions.

You may be shocked by these IRS audit flags:

* Believe it or not, claiming too much in charitable donations may be a flag to IRS auditors. You're likely to be flagged for an audit if you declare $2000 when the average is $500. You need to save your receipts and be able to prove all $2000.
* Too many deductions for those who are self-employed. The IRS is very cautious to look for these kinds of deductions.
* People who earn over $100,000 are scrutinized more carefully.
* Last year's and this year's returns are inconsistent. These can be as simple as a name change due to marriage, but inconsistencies do stick out and are likely to be noticed.
* Considerable changes in income. For instance, the IRS will target you for an audit if you just made $20,000 this year when you earned $20,000 last year. Of course, there are plenty of reasons why your income may have changed so much. Proving it is necessary.
* The IRS flags incomplete tax returns. If an IRS employee has to interpret your tax return because of incomplete answers or unreadable handwriting, they are more likely to flag you for an audit.
* Inconsistencies between state and federal returns.

You can steer clear of an IRS audit by filing your tax returns accurately. Documentation should be kept for at least 3 years. Follow these tips to steer clear of further issues:

* Know that you can settle in installments, do the audit by mail without meeting the IRS, question its accuracy, and other rights.
* Be prepared to show receipts by keeping documentation.
* If the issue is too complicated for you, a professional should be consulted.
* You have nothing to fear if it is an honest error.
* Don't provide more information than needed.
* Do not panic because accuracy is just reviewed and you're not being accused of anything.

Your IRS issue shouldn't be a nightmare. Steer clear of audits, and if you happen to be flagged for one, stay calm. You can always consult a lawyer for help.