9 Reminders to Help Avoid IRS Audits

by Guest Contributor · 17 comments

Many people are scared of the IRS even if they did nothing wrong. If you want to avoid IRS audits, remember that taxes should always be on the back of your mind, not just during April. Furthermore, here are nine precautions you can take to avoid those dreadful meetings with Uncle Sam.

  1. Tax returns with mistakes and miscalculations are much more likely to trigger an audit than returns with complete and accurate information. Double checking your tax return before sending it to the IRS!
  2. Never complete a 1040X to amend your original tax return unless absolutely necessary. Why? Because 1040X forms are viewed with much more scrutiny than original tax returns. If the original tax return and the 1040X differ substantially, your return will be referred to the audit department for further review.
  3. Avoid newer “green” deductions such as the energy tax credit unless you have documentation to substantiate these deductions. Newer deductions are often selected for audits at a higher rate than older deductions so if you’re claiming a newer credit or deduction, be prepared to show proof when you receive a letter in the mail from the IRS.
  4. Try not to add a new dependent to your return unless you experience a justifiable life event, i.e. adoption of a child, birth of a child, care of an elderly or disabled parent. If you are adding a child as your dependent, remember that he or she must have lived with you at least six months plus one day during the tax year for which you’re filing.
  5. Think $1,500. Many IRS deductions have a threshold of $1,500 before a return can be selected for an IRS audit. Therefore, any deduction above $1,500 should be documented with receipts and invoices.
  6. Remember, the only person who has your best interest at heart is YOU. Your tax preparer is often bombarded during tax season and prone to making mistakes, any one of which could trigger audits. You should always sit with your preparer and review your return together before signing it.
  7. Be on the lookout for scams. In the 2008 filing season, many people fell for a scam and filed a form 8888 to request an additional $8,000 stimulus payment which they believed the IRS was refunding. The only problem was that there was no IRS form 8888 or any additional $8,000 stimulus payment. Many of the taxpayers requesting the fake payment were selected for audit.
  8. NEVER mail more than one tax return for each filing season. If you are unsure whether the IRS received your return, allow 4-6 weeks, then call to verify receipt of the return. Receipt of duplicate returns can trigger your return being flagged for an audit.
  9. If you’ve ever been audited before, it’s much more likely that you’ll be audited again. So be extra careful to keep receipts for all deductions if you’ve ever been audited.

Lastly, if you were selected for an IRS audit, don’t fret because Uncle Sam is actually reasonable and pleasant. Remember to read the letters from him carefully and submit anything he ask for. If you filed a legitimate tax return, there’s nothing to worry about.

This post is written by Yvette Carnell, who wrote this article for TaxMattersSolutions.com, which helps people with IRS problems.

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  • vin says:

    I too just received a letter for audit..They are questioning my charitable contributions and business expenses. I do not have all the receipts to show them..I know it is my fault for not keeping them but I am a fireman and have used standard deductions for years with no problems. I also had to file Chpt13 BK last year and I am wondering how I can pay more taxes if my payment plan is already set for the amount of money I make.
    I plan on getting a tax lawyer for this audit but just wondered if anyone had any advice?? Thanks

  • michelle says:

    i was wondering if you could help me out, i was going to claim my niece this year on my income taxes because shes been living with me for 11 months now, i am trying to help my sister out a bit (long story) , anyway when i leave for work in the morning i drop her off at her mothers, she sends her off to school, then ipick her up later after i get out of work, her mother was getting foodstamps for her because this is kinda a temporary thing , she gives me food for her and it pretty much covers all she needs, but i provide clothing , transportation (etc) for her and i had a discussion with her mother about me claiming her which she did agree, but someone was telling me that they are cracking down on that kind of stuff this year claiming kids not your own, and i was wondering if i should even bother to claim her because she dotn get mail at my place i really have no set proof she lives with me, and i dont want to make a mistake claim her and have to pay back over a dumb mistake so before i file i would like your imput. thank you very much for your time

  • Meaghan says:

    Nice post. I absolutely think that first point is most important- double check and don’t make silly mistakes. Make sure that you are focused when you are completing your return (this is not the time to work on your multi-tasking skills.).

  • Yvette Carnell says:

    Louie,

    It’s very disappointing to hear of your experience with the IRS. Unfortunately, auditors are allowed too much flexibility in so far as approving or disapproving a taxpayer’s claim. Often times, there are no clear guidelines with regard to when an item should be approved vs. when it should be disapproved. From what you say, I can’t imagine why your claim was disallowed by your IRS auditor. Sad thing is, if you’d had a different auditor, you probably would’ve had a very different outcome.

    Yvette

  • Louie says:

    @Yvette: thanks for the article, there was some good information in there.

    The IRS and I volleyed via the mail a few times, each time I provided more and more information until I was out of options. I was being audited for 2006’s miscellaneous deductions.

    I had signed letters on department letterhead from my Chief explaining items that I was expected to purchase as well as outlining items for which I do not get reimbursed for. I photocopied sections of my department’s policy manual that outlined items I was required to have which are not provided. I also turned in receipts for continuing education which is needed to maintain my emergency medical technician certificate, a certification that results in termination from employment if it is not maintained.

    The last straw was when I was told by my auditor that I had to prove that my uniforms could not be worn as everyday clothing. What?.?. I sent in pictures of my uniforms and turnouts…outlining that I can not wear fireproof Nomex pants and shirts, complete with badge and shoulder patches, out as every day attire. I also sent in documentation from my department’s policy manual that stated one could NOT wear their uniform unless on duty and failure to comply would result in disciplinary action.

    I also turned in receipts of union dues and initiation fees accompanied with signed letterhead documentation from the union’s secretary-treasurer explaining that I was a member in good standing and had made my payments for that year.

    The whole process was a joke. My degree in Political Science has made me a big proponent of the US Government, but my audit had me second-guessing the system.

    Out of my total deductions, the fed’s would only allow the standard deduction of $5,000.

  • Yvette Carnell says:

    Hope you all enjoyed the article. As a former IRS agent, I try to share my insight whenever possible. Louie, I would be curious as to what type of documentation you had that the IRS refused to accept?

  • Lily says:

    If you get called in for an audit, bring an experienced accountant or tax lawyer. It’s worth the money to have one pro talk to another. Do this even if you prepared and filed your taxes on your own. Otherwise, terror ensues.

    If you don’t, and the IRS insists that you owe, follow the rules and ask for a review of your case. And if that doesn’t work, ask for the Taxpayer Advocate to look into it. It’s your right. Meanwhile, you’ll probably have to pay, but that does not mean you have to give up.

  • Louie says:

    I was in an audit this year for 2006 and it was horrible. They basically wanted my entire refund back (~$3000.00).

    I am a firefighter here in Southern California and they wanted me to prove that I couldn’t wear my uniforms for everyday use. So I sent them pictures and explanations. They didn’t accept that.

    For every write off I had documentation and photocopies from my department that specifically stated I was not reimbursed for said items. They didn’t accept that.

    I could not get a hold of my agent and she would not return my calls. The entire process was a nightmare and in the end, I will pay them my balance. Oddly enough, it’s due September 11. Maybe they did that as a joke for me…who knows.

  • Yeah the IRS scares me. I personally think the IRS and income tax should be COMPLETELY abolished in favor of a flat consumption tax.

  • Good tips. Now if we could just get the people in the current administration and other politicians to pay their own taxes . . .

  • Mandy says:

    I was in an audit a few years back and it was a nightmare. They keep asking for documents that I didn’t have, and they keep telling me to find it when I know i wouldn’t be able to.

    I ended up paying so much money it changed my life. I hate the IRS.

  • Another tip: NEVER CHEAT ON YOUR TAXES. 🙂

    If you never cheat, you will never worry.

  • Revanche says:

    I was pre-selected for an audit before, but once I provided all the proper identification documentation for my dependents, the IRS was satisfied and nothing more ever happened. I liked that experience after the initial scare that I’d done something wrong. 🙂

    • MoneyNing says:

      It’s great to hear stories like this because most people just share their horror stories. Obviously, you just showed that the IRS are out looking for the bad guys and not just anyone.

  • Emily says:

    It’s hard, but everyone should just calm down if they ever receive a letter from the IRS. They are just trying to do their job, and the worst they could do is uncover your mistakes. If they find anything, it’s stuff that you should have paid from the beginning anyway. There’s really no big deal unless you’ve always been trying to evade taxes.

  • Nick says:

    Great tips to avoid getting audited.

    I never heard about that 8888 scam though. Is it more like a prank since no one ever gets any money out of this other than many people getting a lot of hassle?

    • MoneyNing says:

      I agree. 8888 should really be considered a prank. I bet it drove the IRS nuts though and I wouldn’t be surprised if it started from some guy who was heavily fined for back taxes.

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