Everyone dreams of paying no taxes (or claiming a significant sum of cash in the form of deductions), but filing taxes is rarely as enjoyable as Christmas. That becomes especially true when an IRS agent comes knocking at your door and accuses you of tax evasion. Listed below are a few techniques that you can use to avoid key IRS audit triggers with 007-esque stealth.
Avoiding the Top 6 IRS Audit Triggers
1. A Spike in Income
If you just got a sizable raise or you just came into quite a bit of money through a high-stakes poker tournament in Montenegro, then you might set off one of the IRS audit triggers. The agency does take a keen interest in any money you make, but if you made that money legally there is no real reason to fret.
2. Failing to File the Proper Paperwork
While Bond may specialize in subversive precision, your best chances of staying out of IRS crosshairs is through bureaucratic precision. You will need to keep all of your paperwork (1099 forms and W-2 forms) in check and remember to submit it when you file your taxes.
3. You are Self-Employed
Self-employment has a surprising habit of being one of the main IRS audit triggers. Just like MI6 is not a big proponent of independent incursions the IRS has significant regulations for the self-employed. If you work from home be sure to only claim those deductions that you can reasonably justify (especially if you don’t have much income).
4. A Jumbled Paper Trail
Jumbled paper-trails may seem like a great way to make tax evasion possible, but it will alert the IRS that your dealings are not being done with the necessary transparency. Unfortunately, most IRS audit triggers occur because of mismanagement or simply forgetting to ensure your data matches on all of your forms. For maximum IRS avoidance do not claim deductions for hobby expenses, home office expenses or expensive entertainment. Do that and your mission will go according to plan.
5. Charitable Donations
When it comes to charitable donations, your generosity will not go unnoticed (and we mean that). Keep all receipts as well as any records of donations to ensure that, if any IRS audit triggers are set off, you are equipped to defend your deductions.
6. A Foreign Bank Account
An off-shore or foreign bank account has its uses. It also has some major downfalls; the most severe of which comes as a result of misreporting or failing to report your account to the IRS. Be sure to review your records with a keen eye.
If you can avoid the aforementioned IRS audit triggers, you will be able to avoid the hassle of an IRS audit. However, if you already filed your taxes and realize information is missing that could result in a problem, then you may need professional auditing services. The good news is after you’ve been cleared your tax season will officially be over (and that is a comforting thought).