Sales Tax Audits Are no Picnic
3:16 pm April 13th, 2009The IRS doesn’t send birthday cards. When they invite you to a party, it’s an invitation to headaches and worry. Nobody meets the news of an IRS tax audit with a smile.
Yet IRS tax audits are a reality, especially for high-income earners, the self-employed or those who claim a large number of deductions. Keep in mind that the IRS only audits 1 percent of all tax returns under $100,000, but 2 percent of all tax returns over $100,000. The IRS considers that the more money you make, the more likely they are to find discrepancies in your return that results in more money for the government.
There are things you can do from the beginning to avoid ever being audited in the first place. An income tax audit, sales tax audit is no picnic, and you’ll save yourself a lot of headache if you can avoid them in the first place.
For obvious reasons, avoid math discrepancies. The IRS will check your figures to see if they add up. The easiest way for them to look more closely at your return is fuzzy math. Making sure the numbers are right will keep your return from attracting attention.
The IRS uses a formula to see find the income tax audit, sales tax audit that may bring in the most discrepancies and get the government the most money for the cost of the audit. The IRS uses a secret equation to determine the DIF score in order to select returns with the highest probability of having discrepancies that will earn the government more money.
Therefore, if you have deductions for unusually large amounts, you’ll need to be prepared to prove it. If you make sizable contributions to a charity, claim those deductions by all means, but have the paperwork in case the government decides to ask.
It’s very important to be able to substantiate every write-off. Keep receipts for every deduction, and be specific about numbers. Avoid reporting round numbers like $500 or $200 that sound more like estimations or guesses than specific amounts. Even if you’ve lost the receipt, some tax attorneys can provide the paperwork to legally document the expense.
Unless your tax return attracts attention, you’ll probably never be audited. The best way to avoid an audit is to avoid giving the IRS any red flags. It can save you considerable stress and worry in the end.