Contrary to popular belief, the likelihood of being selected for a tax audit is very rare. In fact, the likelihood of being audited has increased dramatically in the past few years. In 2010, American taxpayers had a 1 in 90 chance of being audited; in 2017, that chance has slipped to 1 in 160.
While your likelihood of being audited is fairly slim, it is still wise to minimize your risk of a tax audit as much as you can. There are a few things that taxpayers can do to decrease the chance of an audit. If you still have not filed your taxes, take a look at a few of these last-minute tips.
1. Deduct business expenses sparingly
When selecting returns to audit, the IRS considers tax returns that include many business deductions. The IRS is skeptical about these returns because some unscrupulous taxpayers try to fudge their deductions. Some of the expenses that you can claim on Form 2106 include phone bills, travel expenses, meals and home-office costs. Any expenses that you deduct must be related to work.
2. Consider your charitable donations
Another red flag for the IRS is suspicious-looking charitable contributions. This is another area where some taxpayers try to get creative by listing inaccurate charitable donations in order to have large deductions. Don’t be tempted to pad your donations—be honest about the amount that you have given, and keep a careful record of your contributions.
3. Get a professional opinion
When you do your taxes on your own, it is easy to make mistakes that could trigger an IRS audit. One way to avoid this is to work with a professional to complete your taxes or get a second opinion before you file. Even finance-savvy businesspeople can benefit from working with a tax professional. In addition to potentially avoiding an audit, you may also be able to save money on your taxes.