Avoiding an IRS Audit; Texas CPAs Give Ideas for Avoiding the IRS' Attention

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Avoiding an IRS Audit; Texas CPAs Give Ideas for Avoiding the IRS' Attention
    DALLAS, March 2 /PRNewswire/ -- Although there's no proven way to avoid an
IRS audit, there are steps you can take to minimize your odds.  According to
the Texas Society of Certified Public Accountants, the best way is to take
special precautions with items that might trigger the attention of the IRS.

    REPORT ALL W-2 AND 1099 INCOME.
    Your employer reports to the IRS on Form W-2 the annual income you are
paid.  Freelance earnings are reported on Form 1099, as is income from banks,
brokerage houses, mutual funds, and others who pay you income.  The IRS
computers automatically match income reported to the IRS with income shown on
the taxpayer's return.  To avoid an audit, be sure those figures match.  If
your W-2 or Form 1099 is wrong, ask the issuer to file a correction.

    EXPLAIN LARGE OR UNUSUAL DEDUCTIONS.
    For taxpayers who have something unusual to report, a good strategy is to
attach a statement to the return explaining the atypical item.  For example,
if you have a high amount of work-related expenses that are not reimbursed by
your employer, an explanation may satisfy the IRS agent and avert a
notification.

    AVOID INCONSISTENCIES.
    You should be aware, too, that the IRS establishes norms for such
deductible items as charitable deductions and home mortgage interest, based on
income ranges.  For example, a taxpayer showing an income of $25,000 who
claims to have put $5,000 in the church collection plate is likely to raise
IRS suspicions.

    CLAIM BUSINESS EXPENSES WITH CARE.
    How you generate your income may increase your chances of being audited.
Business expenses and home-office deductions, in particular, invite scrutiny.
That's because the IRS recognizes that if you are self-employed, you have more
opportunities to claim personal expenses as business deductions.  Take the
deduction you deserve, but be sure you have the receipts and records to back
them up.
    Are you taking a deduction for expenses related to a home office?  The
home office deduction is a favorite IRS audit target.  If you have any
questions concerning your eligibility, check with a CPA to see if you qualify.

    KEEP ACCURATE RECORDS IF YOU ARE IN A CASH BUSINESS.
    Occupations in which workers receive much of their income in cash, such as
those in the food and entertainment industries, are often a target of IRS
scrutiny.  Generally speaking, the more cash you receive and the higher your
income potential, the more likely the IRS will want to take a second look at
your return.

    SUPPLY REQUIRED SOCIAL SECURITY NUMBERS.
    This includes yours, your spouse's and your dependents'.  If you're
claiming the dependent care credit, you'll also need to include the Social
Security or tax identification number of the care provider.  Divorced
taxpayers who pay alimony must provide the Social Security number of the ex-
spouse to whom they make payments.

    SIGN YOUR RETURN.
    Remember, if you file jointly, both spouses must sign and date the return.
Failure to include all signatures means your return is incomplete in the eyes
of the IRS.

    CHECK YOUR MATH.
    If the IRS computer catches math mistakes on your return, it's possible an
IRS employee may take a second look at what you've filed.  To avoid attracting
unwanted attention, be sure to verify your math.  If you use tax preparation
software, you probably don't need to worry, but it doesn't hurt to double-
check.

    BE NEAT.
    A sloppy return may suggest to the IRS that your tax reporting practice
may be careless as well.

    SOMETIMES, YOU CAN'T AVOID IT.
    CPAs say that sometimes, no matter how careful you are, you just can't
avoid being audited.  Receipts and records that substantiate your deductions
and the expenses you report can help you through the audit process.

    ABOUT TSCPA
    TSCPA (http://www.tscpa.org ) is a nonprofit, voluntary, professional
organization representing Texas CPAs.  The society has 20 local chapters
statewide and has 27,000 members, one of the largest in-state memberships of
any state CPA society in the United States.  TSCPA is committed to serving the
public interest with programs that advance the highest standards of ethics and
practice within the CPA profession.
SOURCE Texas Society of Certified Public Accountants
http://www.tscpa.org
CONTACT:
Sarah Seals of Texas Society of Certified
Public Accountants, +1-972-687-8688, or +1-800-428-0272, ext.
688, or sseals@tscpa.net