How To Lower your Audit Risk

Taxes should be filed and paid on time to avoid any problem. It’s also important to make sure that what you file is correct to lower audit risk. Internal Revenue Service audits the tax filed by taxpayers if there’s an error in the file or they think there was a mistake made. There can be several reasons why you will be audited. There are also different ways on how to avoid this. You need to be honest and accurate in filing and paying tax.

Here are some steps that you can do to lower your audit risk.

  • Calculate properly. Error in calculation is one of the most common reasons for tax audit. Even if you didn’t really mean to put an incorrect amount, sometimes, you make an honest mistake. Even if this is an error you did not really intend to make, this can still make your audit risk higher. That’s why it’s very important to compute the amount properly. Don’t do this if you’re in a hurry to avoid any error. Make sure to double check the competition or if possible check this thrice. You should also write the exact amount. Do not round off. Even if the amount you round is only small, once you put all of these together, this will still make a difference on the total amount. You can also use auditing software for calculating your taxes. If you own a business, you can get a bookkeeper to make sure that all necessary files will be organized. You can also hire a professional that will handle the preparation and filing of your tax return.
  • List all needed details. Make sure to include all necessary information. Do not remove any amount even this is only small. Your file should be accurate and complete. Also, make sure that funds for business will only be used for business reasons and not for personal purposes especially if you are self employed. Self employed taxpayers usually have high audit risk. Keep all the documents and files for all your generated income as well as when using your business funds so that you will have proof. If possible, scan these so you will also have a stored copy on your computer.
  • File a neat and organized copy. You need to make sure that the copy that you will be filing can be understood properly. If possible, use a computer so that it will be easier to understand. However, if you will be writing by hand, make sure that you write legibly with no erasures. Write all necessary information then review the details. Remove any error and add whatever is missing. Read the file again and if you’re sure that all needed details are there, rewrite the document without any error. If your file is full of erasures, this will not only be hard to read, this can also lead the auditor in thinking that you’re not sure of the details and the document is flawed. This will give you a high audit risk.

File your taxes on time. Be honest and accurate. These will lower your audit risk.


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