How to Avoid an IRS Audit - Yahoo! Finance - 0 views
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Tax season is upon us, with most Americans putting together the materials they need to file their returns, gathering receipts, and searching for other Tax deductions to maximize the amount they get back from the federal government.
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If the IRS begins to suspect that a tax return isn't entirely truthful, the filer might be in for an audit.
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Only about 1.1 percent of people who file a 1040 [the most common tax return] for the 2010 tax year were audited ... [or] about 1.5 million," says Rozbruch. "However, the audit rate is 12.5 percent for people earning $1 million or more in 2010.
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For example, after widespread fraud was discovered, the IRS audited most taxpayers who claimed the First-Time Homebuyer Credit," Reed says. "The Earned Income Credit and the Adoption Credit are also common audit targets, but these are also credits that are often abused, so it makes sense for the IRS to verify that taxpayers qualify for them."
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Two common examples are receipts for contributions to charity and mileage logs. When taxpayers try to recreate these expenses, they discover it is hard to remember events that happened more than a year ago," Reed says. "In the absence of good records, the deductions are disallowed when audited."
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According to Rozbruch, the best track to take when an audit begins is to attempt to make things right immediately.
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Reed adds that if the taxpayer is not maliciously trying to cheat the government, the IRS can be lenient.