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7 Ways to Avoid a Tax Audit

by David Huff on May 1, 2012

“You’re being audited” is probably on just about everyone’s Top 10 List of Most Dreaded Things to Hear!  But,  there are 7 ways to lower your risk of being flagged by the IRS for an audit. And believe it or not, they are pretty basic things to do.

1.  Do NOT round numbers on your tax return. It’s better to put down $2345 than $2500. You do not have to include cents.

2.  Put explanations on paper that you cannot put with e-filing.  If your tax software does not allow for explanations, then it is wise to print out your return and attach an explanation and mail those in to the IRS.

3.  Check, and double-check.  Make sure sums are correct along with information placement.  One of the top errors on tax returns is placing information on the wrong line.

4.  Pay attention to all the required information.  It is easy to forget some of the basic information on a return, such as forgetting to put your Social Security number, address, or even your signature.

5.  Document all your donations.  The normal contribution is 2% of your income. Keep all letter or receipts from charities-but be especially mindful of keeping paperwork for donations of $250 or more.

6.  Keep records for your receipts.  Jot down notes on the backs of receipts explaining who your were with and the reason you were with the person.

7.  Document bank transfers.  If you move money around from one account to another on a regular basis, it is wise to keep track of these transactions.  With alot of movement from one account to another, it can often appear that you have more money than you actually do.

David W Huff, CPA, PFS, MS is a partner at Person Huff CPA Group. He provides clients with tax preparation and consulting services, accounting services, retirement plan and benefit consulting, accounting software technical support and training, and management advisory services. His specialty is helping new businesses organize their operations to maximize tax savings and move quickly from start-up to profitability.  You can reach David by email at:david@personhuffcpa.com

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