Nine easy ways to reduce your chance of being audited

1. Have a tax professional prepare your return
Pros know the tax rules and are unlikely to make ignorant or illegal mistakes, so returns done by professionals are audited less than those from individuals. If you are audited, your tax pro can handle the negotiations with the IRS for you or coach you to represent yourself.

2. Show all names and identification numbers EXACTLY as they appear in government records
When part of a name or number doesn’t exactly match what’s in the official Social Security or IRS database, it kicks your return into the error pile. If you or anyone else you list has changed part of their name due to marriage or divorce, stick with the old name until the record is updated at Social Security. These little mistakes can open the Pandora’s box to bigger problems.

3. Check your math and numbers carried to other pages
Your tax professional’s software will do this automatically, but if you insist on doing it yourself, get a friend with fresh eyes to double check your entries page to page.

4. Break down any huge total for just one expense item
If you list a disproportionately fat total for one type of expense, it’s sure to raise red flags -- especially if you call it something vague and general, like “Outside Services”. Break that big total down into smaller components with more specific descriptions.

5. Don’t write off 100% of home or car expenses for business
The IRS is particularly sensitive to this issue because there have been some illegal work-at-home scams that told people to write off ALL their home expenses as business expenses. The scam company made a lot of money off these gullible fools and caused a lot of them to get audited. It’s too bad so many people fell for what they should have been suspicious of. (Remember, anything that sounds too good to be true probably is!)

If you have an office at home, it really only takes up part of the total space, only uses a portion of the utilities and so forth. Don’t get greedy. If you deduct 100%, what you’re trying to do will be instantly obvious to the IRS. Due to the excess cheating they’ve seen with this deduction, they are quick to spot suspicious deductions. Be reasonable and stick to what you can back up with square footage figures.

Car expenses, too, would likely only have some portion that qualify as a business deductions. Unless the car is owned by your company and is ONLY used for business -- no home to business commuting -- you’ll need to differentiate business from personal use, and back up your percentage with mileage records.

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