A tax audit is never a fun experience. Be sure to follow these steps to decrease your odds of being audited by the IRS.
- Monitor your transactions. Certain transactions, like currency exchange transactions are a big red flag to the IRS. Even if you don’t report your currency exchange transaction, there is a good chance that the bank will. These types of discrepancies draw even more attention and increase your chances of being audited.
- Report ALL your income. Leaving out some of your income on your tax return, whether purposefully or not, is a surefire way to trigger an IRS audit. The IRS has increased their monitoring processes to attempt to catch unreported income, so chances are good that they will find it.
- Too many large cash payments can be a red flag to the IRS. If you run a cash-based business, be sure to do it honestly. Using cash can be more convenient, however too many large payments, especially over $10,000 are likely to be reported to the IRS. Many cash-based businesses are often the source of underreported income, so this could trigger an IRS audit. Be sure your cash-based business works with a tax professional to ensure you are reporting your taxes properly and to prevent back tax debt.
- File your tax return accurately. Making mistakes on your return is a great way to catch the attention of the IRS. Be sure to keep all your important records so you can prove all your deductions and credits. eFiling is a great way to avoid simple calculation mistakes. Be sure you report all overseas assets and finances, as well. Working with a tax professional will help you stay within the law and file an accurate tax return, decreasing your chances of being audited by the IRS.