How To Avoid An IRS Tax Audit

BOSTON (CBS) - There's something about just three little letters that can strike fear into the hearts of even the most law-abiding taxpayers: IRS.

We all have to pay taxes but it turns out we have some control when it comes to staying under the IRS radar and avoiding an audit.

"Sometimes people will apply for benefits or credits that they're not necessarily entitled to," says Patricia Svarnas, a spokesperson for the IRS.
That's red flag number one. Applying for tax credits on things like continuing education, retirement contributions, or those new solar panels could draw the attention of auditors. Especially, if you don't have the papers to back it up.

"You also want to be careful of your allowable deductions, " says Svarnas. "Make sure you don't include all kinds of deductions that don't make sense for your profession." So, don't deduct winter coats if you have a desk job or write off the cell phone that your company pays for.

If you have a hobby that brings in some cash like selling stuff online or photography that income must be reported. But watch out how much you write off as a loss. "Especially if these filers have a lot of other incomes from other sources," says Kiplinger's Tax Editor Joy Taylor.

Other ways to get yourself audited: Failing to report all your taxable income, big deductions for business meals, travel, and entertainment, and while it's good to give, if your donations to charity are above average you could wind up hearing from the IRS.

"If you're in an income level and your charitable deductions are disproportionately high, compared to others in that income level, your return is more likely to be flagged," says Taylor.

Speaking of income, the more money you make the more likely the IRS could come calling. Once you begin claiming over $200,000 your chance of an audit starts to rise.

If you do wind up facing an audit here's more information from the IRS about the process: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/IRS-Audits

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