Top Tips to Prevent an IRS Audit
Audits are generally rare: Small C corporations (total assets less than $10 million) faced an overall audit rate of 1% in 2014. Companies with assets between $1 million and $5 million were audited at a 1.2% rate, and those with assets between $5 million and $10 million faced a 1.9% rate. C corporations with assets between $10 million and $50 million were audited at a 6.2% rate. Of course, the fact remains that the IRS can audit any individual or business for any reason at any time without questions. And while there's no 100% foolproof method to prevent being audited, what you can do is protect yourself financially and keep accurate records in case the time ever comes when you start receiving IRS unpaid tax notices. Here are just a few top tips to decrease your chance of being audited.
Understand IRS Habits
First, it's important to understand the financial habits that the IRS looks for when deciding who to audit. They're on the lookout for outliers in their set of national tax filing data. Knowing this, it makes sense to file your taxes mindfully:
"When it comes to returns which might be ripe for audit, the IRS is looking for outliers, or data patterns that are outside of the norm...Consider the value of making a claim that might put you at risk for audit: is it worth it? If it is, then don't be intimidated. Just make sure that your tax story is your real story - and that you have the records to prove it," writes Kelly Phillips Erb on Forbes.
Hire a Tax Lawyer
It's also a good idea to work with a tax lawyer if you have a particularly complex set of assets or you simply want to maximize your audit protection. A tax lawyer can walk you through each step of the filing process to help you save more and reduce your risk of being audited. It's an investment that always pays off.
Again, there's no 100% foolproof way to prevent an IRS audit, but informing yourself with this info can certainly help to reduce your chances. For more information about the types of IRS installment agreements, IRS collections statute of limitations, or IRS unpaid tax notices, contact IRS Legal Defense.