August 22, 2008, Newsletter Issue #77: Tax Audit Protection

Tip of the Week

You can help protect yourself from an IRS tax audit by following these simple suggestions:

Maintain good records. If you are ever called in for an IRS audit, you will need to have good records. If you do not, you can be assessed a penalty. A poor record keeping system can signify willful neglect.

Hire a professional. If you are not tax knowledgeable, hire someone who is. A trained tax professional can help you with your tax situation. Perform a background check prior to hiring.

Obtain IRS Publications. Whenever an IRS tax area affects you, obtain the applicable IRS Publication. They make good reference tools throughout the year. Even if you totally do not understand them, they do provide a foundation of useful information.

Respond promptly to any IRS communication. By doing this, you will protect yourself from further IRS questioning and possibly audit.

Respond honestly with IRS. Answering questions completely and honestly when communicating with the IRS is essential to your success.

Take advice. Even if you are not completely knowledgeable about tax laws, take your tax professional’s advice.

Know tax implications. By knowing the tax implications of any purchases, you can help avoid audits.

Meet deadlines. Meet the tax filing deadlines. Do not file late. Do not have your tax return stand out if you want to avoid the possibility of an audit.

Paying on time. Pay your taxes on time. Same reasoning as above applies.

Follow guidelines. Follow the IRS guidelines regarding applicable areas. For instance, if you have a home business, know the intricacies of that area before you claim it on your tax return.

Double check. Double check your tax return prior to filing it. Make certain everything is correctly filled out. Make certain you have not included too many zeros, for instance. Make certain there is something on each applicable line.

High risk areas. If you are involved in an audit high-risk area, make certain all of your information is correct. Even though you may be involved in an area known as high risk, not everyone is unscrupulous. Prove that you are not. Have someone else go over it.

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