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.

Check out more information on avoiding tax audits, here.