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5 steps to minimizing your IRS audit risk

On Behalf of | Feb 2, 2016 | Tax Law

Though taxpayers cannot predict whose returns the IRS will choose to audit, there are things you can do to shield yourself from tax problems. Nobody wants to deal with the headaches of dealing with the IRS, so following these rules, as provided by Forbes, can make your life a lot easier.

  • File your tax return. File on time, or get an extension. If you have a tax bill, pay it if you can, but at least make sure to file.
  • Don’t try to mix business and pleasure. Trying to deduct personal costs as business expenses is a good way to get audited. Avoid the temptation to deduct things like the cost of a divorce, hobby or vacation with a potential client.
  • Keep good records. Even if you do not own a business, having all your documents can end an audit more quickly, if the IRS ever challenges one of your deductions.
  • Take a close look at your 1099s. If one of them is incorrect in some way, contact the payor, find out if they already sent a copy to the IRS, and ask for a corrected form.
  • Pay small bills, and keep tax debts under $50,000. The law now says that if your owe more than $50,000, the IRS can try to seize your passport. On the other end of the spectrum, relatively small tax controversies may not be worth the time and expense of fighting. Right is right, but at least consider the possibility of paying the bill instead.

Even the most careful taxpayer can end up in tax trouble, perhaps due to bad advice from a tax preparer. Serious controversies require the help of a tax lawyer to work out.