How to Avoid an IRS Audit

Brian struggled for years as a single dad of three children-one of whom had special needs. But he fought every day to build his construction business and give his kids a life he never had. Despite strong odds against him, Brian broke through. He created a thriving business, operating in three towns. Thanks to his grit, Brian’s annual income climbed from around $70,000 to nearly $600,000 within just three years. He was on cloud nine, until he received a scary notice in the mail from the IRS. He was being audited.

Why would the IRS audit someone like Brian? More broadly, what “red flags” attract the agency’s unwanted attention?

  • First, the IRS chooses random people to audit every year. Sometimes in life, you just draw the short straw.
  • Another red flag is incorrect preparation of tax forms. Brian was very much a do-it-yourselfer. He was smart, but he was not a professional tax preparer. He made several errors categorizing expenses and payments.
  • Another red flag is high income. Brian’s income jumped by over 1,000 percent in just three years. Such a change often triggers stronger scrutiny of tax returns.
  • If you take inappropriate or unreasonable deductions, the IRS may flag your return.
  • Finally, if you use a dubious tax preparer, your association with him or her can get you audited.

It’s important to work with a team of professionals when preparing for an IRS audit. A knowledgeable CPA and tax attorney will organize and catalogue key documents including:

  • Bank statements
  • Investment reports
  • Business and personal receipts

During the organization of key documents, they’ll pay special attention to areas that could have triggered the audit. Ind addition, have a strategy for the IRS interview. When you meet and auditor:

  • Be kind and cordial
  • Avoid getting emotional
  • Stay organized and in control
  • Ask questions to clarify as needed
  • Remember that the IRS agent is not an “enemy” but nor is he or she “on your side.” For instance, the auditor may try to get you to say definitive statements about your cash balance to lock you into a certain position. Behave professionally, and strongly consider having a qualified tax attorney guide you through the process.

If you have questions about estate planning and how best to protect your loved ones, call an estate planning attorney, like an Estate Planning Lawyer Belgrade, MT, today.



Thank you to the experts at Silverman Law Office, PLLC, for their insight and expertise in estate planning.