The last day to file personal and C Corp (1120) tax returns is 15th April 2024. Please expedite your filings.

What Are 10 Ways to Avoid a Tax Audit?

Government and authorized authorities review a taxpayer’s financial statement and tax record through tax audits. It is done to check whether the taxpayer is complying with tax laws and regulations. Internal Revenue Service (IRS) mainly conducts tax audits throughout the US. During your tax audit, the tax agency will examine your financial records, including bank statements, invoices, and receipts. It is done to verify the completeness and accuracy of your tax return. Besides this, the tax agency can also conduct interviews with the taxpayers to collect complete information.

The main goal of the tax audit is to identify errors in the taxpayer’s financial records and also to access additional taxes, penalties, and interest if owed. The taxpayer selection for a tax audit is usually made through a random selection. Furthermore, it is also based on suspicion of non-compliance. So, taxpayers need to keep their financial records accurate and up to date. They should also fully cooperate with the tax agency during their tax audit to ensure compliance and minimize any penalties. However, it is only sometimes necessary to have a penalty.

10 Effective Ways to Avoid a Tax Audit in the US

If your business documents and data are not accurate as a taxpayer, then an IRS audit can be stressful for you. Although audits are rare, there are certain steps you can take to avoid being selected for the one. Read below for the most effective ten ways to avoid your tax audit in the US.

Accurate and Complete Tax Returns

The best way to avoid a tax audit is to file a complete and accurate tax return. So, you have to double-check the math. It helps you ensure all the information you enter is correct. Moreover, it also includes all the relevant forms and schedules. 

Avoid Math Errors

One of the most common reasons for an IRS audit is math errors in your tax return. That’s why you should be very careful while calculating your taxes. Also, please double-check your documents and data before submitting your tax returns. You can opt for software to do the math for you or hire a professional auditing service to do the job accurately. 

Keep Your Business and Personal Expenses Separate 

Many business owners must correct a mistake by mixing their business and personal expenses. As a result, they end up not filing accurate tax returns. For business owners, it’s mandatory to keep personal and business expenses separate. Keep in mind that IRS will look closely if you report personal expenses as business expenses. 

Don’t Round Off Number

Good bookkeeping will help you a lot in this regard. If you round off numbers on your tax returns, it will raise red flags with the IRS. That’s why you should be sure to report exact figures, even if they have decimals. 

Be Realistic in Deductions

While deductions can help lower your tax bill, claiming too many of them can create doubts about the IRS. Thus, make sure you are only claiming deductions that you are entitled to. Also, please keep an accurate record of supporting them to avoid any penalties in case you are getting audited. 

Report All Sources of Income

It’s significant to report all sources of income on your tax returns. You must also include wages, tips, interest, dividends, and capital gain. You must report all your income sources to avoid facing an income tax audit. 

Filing On-Time

You will quickly get into a tax audit if you do not file your tax returns in time. Filing your tax returns help you a lot avoid an audit. If you file your tax return late or request an extension, there are more chances that IRS will look closer at your tax returns. Thus, always be on time for filing!

Avoid Claiming Excess Losses

You can raise doubts for IRS if you claim excessive losses, especially for a business or investment property. Therefore, be very careful while you report your losses. Also, make sure that the losses that you mentioned are reasonable and supported by documentation. 

Be Careful With Charity Contributions

Charitable contributions are tax-deductible, and you must be very careful when claiming them. Make sure that you have documents and pieces of evidence to support your contributions. Also, be aware of the limits on charitable deductions. 

Choose Professional Tax Auditing Services

If you are not confident about your tax return, it’s a good idea to hire a professional taxpayer or agency providing tax auditing services. An expert tax professional can help you avoid errors and ensure that your tax returns are complete and accurate. 

Tips to Follow When Your Get Audited 

  • Getting audited can be a stressful experience, but here are some tips you can follow to make the process easier and smoother for you. 
  • You should keep all your financial record in order and organized. So, you will be relieved if you get an information request from the auditor. 
  • Make sure you completely understand the purpose of the audit and what documentation your auditor will need. It will help you prepare and ensure that the audit runs smoothly. 
  • The best tip is to be honest, and accurately answer the auditor’s questions. If you try to hide any information, it will not benefit you in any sense. 
  • You should be responsive to the auditor’s request. Maintain a professional line of communication throughout the auditing process. 
  • Seek professional guidance for federal or sales tax audit services. You will get valuable guidance and support to comply with all relevant tax laws. 

Final Thoughts

Avoiding a tax audit in the US requires careful attention to detail and accurate record-keeping. By following the tips mentioned above, you can reduce your chances of being audited by the IRS. First, make sure that your turn is accurate and complete. Also, remember that prevention is better than cure, so take the time to get your tax return right the first time. Hiring professional services are the best options indeed.


How does the IRS select taxpayers for audits?

IRS selects taxpayers by several methods such as random selection, matching tax returns with third-party data, computer screening, or maybe through an audit of a related party or business partner. 

What is the process of a tax audit?

During a tax audit either by IRS or other tax authorities reviews the taxpayer’s financial record. They also review tax returns to verify the accuracy of the given information. Besides this, the tax auditing authority may demand additional documents and data or ask questions to clarify their doubts, if any. 

What is the potential outcome of an audit?

The potential outcomes of a tax audit may include no refund, no change or additional taxes, penalties, and interest owed. In case the auditor identifies errors in the taxpayer’s record, they may suggest adjustments. Furthermore, they may also recommend a further examination, which can result in additional tax liability. 

Name the five stages of audits.

The five stages of the audit are:

  • Selection
  • Planning
  • Carry out fieldwork
  • Result reporting
  • Following up on action plans
Scroll to Top