Thursday, February 21, 2013

10 Steps to Avoiding an IRS Tax Audit

Avoiding an audit MSN Money offers ten tips on how to avoid an IRS audit. MSN Money

The link above is a quick video pointing out 10 tips to avoiding an IRS Audit. According to the video someone filing a schedule C with their return is 10 times more likely to be selected for an audit.  In my professional opinion you can avoid an audit if you fly below the radar, pick the right preparer, take the deductions you are entitled to, and if it sounds too good to be true when you receive your return, it probably is. Remember, check your return and it might even be a good idea to get  second opinion from another preparer.  Also, check the credentials of your preparer; is the preparer you hired an Enrolled Agent, or a CPA? Don’t be afraid to ask for references.  Further, don’t be afraid to ask the preparer to explain your return.  I am in the middle of a tax audit right now for a client who did the right thing for many years, but trusted his preparer to inform him of rules and regulations, inform him of what is needed to prepare an accurate return, as well as tell him rules regarding his losses.  Unfortunately, he has a preparer who did not do the right thing and now the IRS is challenging the following:

- Hobby Rules (A business must make a profit at least 3 of last 5 years)
- Schedule C Mileage
- Schedule E Tax on Rentals
- Schedule C Business Expenses

He may end up owing quite a bit of money due to the fact the IRS may not allow any of his Schedule C deductions, the tax paid on one of his rentals, as well as the mileage taken during the year.  Overall, we will be able to assist with both the audit and the ensuing tax liability.

If you or someone you know is undergoing an audit, a reconsideration, or a CP2000 letter also known as a proposed tax increase, feel free to call us at 720-398-6088 or check out our website at