There are few life experiences that inspire as much fear as learning that you are being audited by the Internal Revenue Service. While only one percent of the tax returns filed by taxpayers in the United States get flagged for audits, when you are in that number, it can be seriously uncomfortable. It's definitely not the elite one percent group to which anyone aspires to belong.
But it's also not the end of the world. Before you go into panic mode and worry that this year will be the year they come for you, take a few deep breaths and relax. Then read the tips below to minimize your chances of submitting a return that will warrant a closer look from the feds.
Don't underreport your income
Make sure that every 1099 and W-2 you receive is accounted for and submitted. For those who are self-employed or working as independent contractors, it can be all to easy to leave a single consulting job out of the record. Resist all blandishments to do this by keeping scrupulous tax and accounting records all year long.
Too late for that? Move on to Plan B, where you rack your brain for every possible income source in 2016. Revisit old emails, bank statements and correspondence. You want to make sure that your figures match what the IRS is expecting you to report.
Beware of claiming a deduction for your vehicle usage
Self-employed individuals and business owners have to be able to truthfully claim they only used the vehicle for business purposes. That's a tough one. Even families with multiple vehicles tend to sometimes use the "work truck" to run errands or as a spare for teen drivers to take for a spin. If, indeed, you did only use it for business purposes, be prepared to back up your claim with extensive gas and mileage logs.
Taking charitable tax deductions? Document everything
Be aware that the IRS has a really good idea of what a person in your income bracket can afford to donate annually to charity. If you are exceptionally good-hearted and gave 'til it hurt last year, realize that is going to be a major red flag to the agency. If your donations appear out of line with your stated income, document every penny of your largesse.
Don't do your taxes by hand
It's true that it's legal to do so and still the favorite method of some older retirees who have done it that way for the past 60 years. But writing out your return by hand is guaranteed to draw extra attention. When it comes to an audit, blending in with the crowd is the way to go. Express your individuality another way.
Don't amend your return
The lesson here is get it right the first time. Why run it through the system twice, increasing your chances of an audit. That being said, however, if you did make an error, own up, amend it and hope for the best. At least you are being honest.
Triple-check your figures
Look out for typos and math errors that could indicate an attempt to pull a fast one, or at the least, a hastily filed return that may or may not be accurate. Tax software programs have built-in features to make errors harder to make, but some still slip through.
Seek help from a tax attorney if you get audited
It's just good business sense to walk into an audit with your tax attorney by your side. It doesn't mean that you have done anything wrong. It shows that you are prepared and taking this seriously.