Becoming the target of an IRS audit is something many taxpayers want to avoid, and yet a lot of people do not think it will happen to them. In fact, the IRS only conducted an audit of 0.5% of all tax returns in the year 2017. Still, that is no guarantee that anyone is safe from an audit, as any mistake on a tax form can invite suspicion from the IRS.
Properly preparing a tax form can do a lot to prevent a lengthy audit. Even if the IRS starts making inquiries, dealing with their questions early could stop an audit before it ever starts. Forbes describes some steps taxpayers might take to cut their audit risks.
Seeking advice while preparing taxes
Taxpayers with complicated tax issues face all sorts of potential pitfalls that could draw unwelcome attention from the IRS. These pitfalls may include failing to file forms, not reporting offshore accounts on a return, or neglecting to report other sources of income like a windfall from a lawsuit. In such situations, taxpayers are probably better off asking a professional to prepare their returns or at least give them advice on what they should do.
Dealing with IRS inquiries early
Sometimes the IRS will contact a taxpayer with a short inquiry. Some taxpayers might feel tempted not to respond in the hopes the IRS will forget about them. However, this is more likely to invite larger repercussions from the government. At the same time, taxpayers should watch what they do tell the IRS about their situation. If a taxpayer answers an inquiry in a timely manner and without inviting further suspicion, it could resolve the issue right then and there.
Keeping your past tax records
While it is true the IRS generally has three years to conduct an audit on a taxpayer, the agency may extend it to six years or indefinitely under certain circumstances. For this reason, taxpayers are better off keeping copies of all their past tax returns as well as any related documents. For instance, the IRS may ask a taxpayer for documents that support the credits or deductions the taxpayer had claimed on a form. Keeping these important documents may make the difference between solving an audit early and risking a lengthy audit.