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3 tips for avoiding a tax audit

The tax season is upon us! March is the time when most individuals and families realize that April 15 is only a few short weeks away. While tax preparation software has seemingly become the normal way to get taxes done, many families still seek the services of a tax preparation specialist or accountant (or lawyer), or even attempt to do their forms themselves.

Regardless of the method used, many people still worry about the possibility of an IRS tax audit. As you start working on this important deadline, here are few tips to mitigate that possibility.

1. Check the math, even your accountant’s.

Yes, you paid someone so that you would not have to do the math yourself. However, math errors are one of the most common reasons the IRS might flag a return for auditing. Most tax specialists are happy to go through your return with you before you sign and file it, so you can be confident that the numbers all add up.

2. Do not fudge the numbers.

Rounding too high or low, underreporting income, over-reporting deductions, giving ballpark figures – all of these "time-savers" can trigger an extra look from the IRS. Save all of your tax documentation in a single place when it starts showing up in your (physical or email) mailbox in January. Similarly, keep all receipts for major purchases or disbursements throughout the year in a safe spot. This way you will have all of your records ready to go when you finally sit down to do your return or head to your accountant's office. 

Reporting accurate figures, as opposed to estimates, ensures your numbers will look legitimate and in line with others in your tax bracket.

3. Accurately report your side-job expenses and earnings.

Many people today have a side hustle, whether that’s selling hand-crafted goods on Etsy or using their expertise to help a friend of a friend. These side gigs can be great for boosting your income, but it also means you need to keep meticulous records yourself. This is especially true when you were paid in cash. Insist upon receiving a 1099, and/or try to get a receipt or an invoice for the work if you can.

You should also keep accurate records and receipts of any supplies or materials you wish to claim as home office deductions. Unusually high claims in this area can cause the IRS to take a second look at your return.

Don't sweat it

The truth of the matter is that less than 1 percent of individuals will be chosen for an IRS audit, though people continue to worry about it. That said, you can reduce your risk of an audit by following the above advice. You can also seek out the assistance of a qualified tax professional who can help make sure your return is in the best possible shape before it goes to the federal and state government.

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