While there is no definitive way to reduce audit risk, there are some tasks that can be performed in order to ensure a smooth tax filing process. The first thing that you should keep in mind while preparing your taxes is that a neat and orderly tax return is the best course of action. Thus, using a computer to file your taxes is the first step towards eliminating audit risk.
If you live within the United States, keep in mind that the IRS files taxes using a computer system. Therefore, any taxes that are not computer-generated may cause the IRS computer to read a handwritten tax form improperly. If the IRS computer cannot read your tax return, then you may be audited. Using a reliable computer program to prepare your taxes is a wise choice. The same logic can be applied to any country that relies upon a computer system to process tax returns. If you must use a piece of paper and a pencil, be sure that your handwriting is neat and free of blemishes.
Next, try and be as precise as possible when it comes to listing numbers. Generally, round numbers are not the best choice. Since these numbers appear as estimates rather than accurate figures, it's best to list non-rounded numbers. Furthermore, always keep copies of any large claims that you may be making. For example, if you plan on making a claim for damage due to a blizzard, include copies of all repair work with your tax return. Otherwise, your claim may look suspicious.
While electronic filing is a popular way to speed up the tax process, this type of filing may also be detrimental. Many tax professionals believe that submitting a tax form electronically actually puts people at a higher audit risk. Since electronic filing is a type of automated process, people who file electronically may be entered into an audit cycle as well as a filing cycle. However, filing electronically will ensure a quicker tax return.
On the other hand, there are a high number of tax professionals who believe that filing electronically is the best way to avoid audit risk. The theory behind this notion is that filing electronically eliminates human error, which can raise an alert. If you are unsure of whether or not to file electronically, speak with a tax professional regarding the pros and cons of an electronic filing.
Lastly, hiring a professional accountant to complete your tax return may be expensive, but this type of service is often worth the extra cost. Generally, those people who hire tax accountants have less of an audit risk than those who attempt to file individually. In the end, the best way to avoid any kind of audit risk is to create an orderly, accurate, and detailed filing.
