Tips to avoid audit from IRS

Published On: Apr 02 2013 02:24:41 PM EDT
Updated On: Apr 02 2013 07:40:10 PM EDT

While some audits happen randomly and cant' be avoided, Ruth to the Rescue has advice on when taxpayers should be extra careful.

DETROIT -

For some people, a recurring nightmare of being audited is enough to keep them awake during the busy tax season.

Thoughts of tax penalties, interest payments, and punishment can be daunting. Several people in Grosse Pointe Park told Ruth to the Rescue being audited would be stressful.

"Because they're assuming that you've done something wrong. I try to be as honest as I can," said one woman who didn't want to share her name.

"To be honest, I wouldn't want to be audited at all, that's the first thing would be 'Oh crap!' I guess," said John Hassett, of Grosse Pointe.

The nightmare does become reality for many people, and not just millionaires. Jennifer Owens, an office manager at H&R Block, says 1.5 million individual taxpayers were audited in 2011. She said 2 out of 3 earned less than $50,000 a year.

What Can You Do?

Since even small mistakes can trigger an audit, you should go over your returns very carefully. Here are some steps to avoid throwing up red flags that might catch the eyes of IRS auditors.

*Be sure to account for every penny you've earned. Any discrepancy could flag the interest of the IRS.
*Avoid simple math mistakes. Even if they're honest mistakes, the IRS doesn't like any inaccurate numbers.
*Double check every line before you hit send or mail your return.
*Be extremely careful with deductions in areas where the IRS has seen abuses in the past. For example, claiming a home office.
*Make sure your interest and dividend reporting are in synch.
*Avoid bragging about your deductions on Facebook or other social media. There are reports the IRS trolls social media looking for signs of cheating.
*Make sure you have an honest, trustworthy tax preparer. If they've been in trouble with the IRS before, that could put you on the agency's radar.

"Whatever amount of square footage you claim, that should be used only for business. You shouldn't have your kids in that area- they shouldn't be using the computer and things like that," said Jennifer Owens, an H&R Block office manager.

Self-Employed, Be Careful

Another area where the IRS can be really picky is with business deductions for the self-employed. If you use a car for business purposes, be sure to log personal and business trips clearly and honestly. It's rare for a vehicle to be used just for business, which means the IRS could come looking at your mileage.

If you're writing off meals and entertainment, keep receipts and detailed records. Owens advises that you write down the purpose of every meal on the restaurants receipt, as extra proof that the meal was truly business-related.

"If the IRS ever came back, they might see the receipt, but they're like 'How do we really know that you really talked business during this occasion?' and generally they will accept that," she warned.

Check out irs.gov for resources regarding proper deductions and how to deal with an audit. You should be able to find helpful tips on proper record keeping.

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