What Is an IRS Audit?
The Internal Revenue Service, which is generally referred to as the IRS, is the federal department that is responsible for collecting federal taxes from the population of the United States. Many people battle with the IRS on a regular basis and attempt to pay as little in taxes as possible. In fact, the IRS estimates that upwards of $300 billion is lost each year to those who con the tax system. To combat this, the IRS audits the tax records of those who they suspect of cheating on their taxes. An audit involves a lengthy investigation into the tax records of an individual or company, all with the goal of discovering whether any misconduct has been perpetrated by the taxpayer. During the audit, the taxpayer is simply asked to provide proof that his numbers were correct and that he didn't cheat.
What Triggers an IRS Audit?
There are several different ways in which an IRS audit can be triggered. The most frequent IRS audit triggers are incorrect math or numbers on tax forms, high cash earnings, whistle-blower reports, extraordinary deductions and the hiring of a known crooked tax professional. While there are many other potential triggers, these main triggers constitute the vast majority of instances in which a full IRS audit is ordered.
What Can I Do to Prevent an IRS Audit?
There are several methods that one can use to try to minimize their risk of undergoing an IRS audit. To begin with, it's always a good idea to go over your taxes several times to check for mistakes. Also, it's important to withhold money from your earnings, even those that are given to you in cash, and to properly report those earnings. One should never brag about their deductions or about any questionable tax practices because informers are given rewards for turning in such people to the IRS. Also, it's a good idea to keep your deductions reasonable, to keep excellent documentation and to check and make sure that your tax professional is reputable before you hire her.