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Information and resources for preventing and preparing for tax audits.

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HowStuffWorks "How Income Tax Audits Work"

An income tax audit is an examination of a tax return. During an audit, an IRS examiner makes a line-by-line assessment of your tax return. If something doesn't  ...

Top Five Ways to Avoid a Tax Audit - TurboTax® Tax Tips & Videos

If the IRS does decide to audit you, there is little you may do to stop it. You may, however, reduce the odds that you'll be singled out for that extra attention in the ...

What Are Tax Audits? - TurboTax® Tax Tips & Videos

A tax audit is an examination of your tax return by the IRS to verify that your income and deductions are accurate.

IRS Audits - Internal Revenue Service

Jun 23, 2014 ... Watch our video series, Your Guide to an IRS Audit. ... correctly, according to the tax laws, to verify the amount of tax reported is accurate.

Red Flags that Tempt the Tax Auditor | Bankrate.com

The IRS is auditing fewer returns. But be aware of red flags that will tempt any tax auditor.

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Tax Audit Defense and Audit Help Experts | TaxAudit.com

TaxAudit.com offers tax audit defense and representation services for IRS and state audits. Get IRS audit help from the experts at TaxResources, Inc.

Income tax audit - Wikipedia, the free encyclopedia

In the United States, an income tax audit is the examination of a business or individual tax return by the Internal Revenue Service (IRS) or state tax authority.

6 Reasons Your Tax Return Might Get Audited | Fox Business

Feb 18, 2014 ... While it remains unclear exactly what triggers an audit, tax experts say there are some common factors that can increase your chances of ...

Calculator: What's Your Risk of a Tax Audit?-Kiplinger

Use this simple calculator to determine your odds of being audited by the IRS. ... for what one author calls "the ultimate curse of a civilized society — a tax audit"?

What Are the Odds That Your Tax Return Will Be Audited? And What ...

Apr 30, 2014 ... Overall, the odds are reassuring. The vast majority (almost 99%) of individual income tax returns skate safely past the IRS audit machine.

Five common myths about the dreaded tax audit - Yahoo Finance

Feb 3, 2014 ... Filing taxes is punishment enough without the vague threat of an IRS audit looming over our heads. For understandable reasons, the IRS ...

Frequently Asked Questions About Your Tax Audit - California ...

FTB 1015B (REV 10-2011) SIDE. FRANCHISE TAX BOARD. Frequently Asked Questions About Your Tax Audit. This pamphlet provides answers to some ...

Avoiding an IRS Audit


Of all the ways you can be unpleasantly surprised in your business, few measure up to notice of an IRS tax audit. Only about 1 to 2 percent of all returns get audited each year, but that still means a million or more tax filers can expect the IRS to review their returns. While there's no sure-fire way to keep the IRS at bay, there are strategies you can take to reduce your audit risk. Understanding basic tax rules is important, as is using sound business practices. Where most businesses get into trouble:
  1. Taking improper business deductions
  2. Overstating or understating company officer salaries
  3. Not filing employee payroll tax forms or failing to submit employee payroll taxes
  4. Misclassifying employees as independent contractors
  5. Operating in an industry with a known high rate of tax problems (including restaurants and construction)

Hire a good accountant and heed the advice you get

Finding the right accountant is one of your most important tasks. It's best to hire someone who's familiar with small business, and it's even better to retain an accountant with experience in your specific industry. For example, if you own a restaurant, you'd be wise to find an accountant who's dealt with restaurants and understands the need to collect taxes on employee tips - an issue that trips up many restaurant owners.

Watch your deductions.

One of the perks of business ownership is the ability to write off expenses and reduce taxes. But be careful. Oversized deductions are a red flag to the IRS and can trigger an audit. Get caught slipping personal expenses into the business mix and you might find yourself not only facing a back-due tax bill but penalties to boot.
IRS overview of business deductions.

Make sure your contractors aren't employees

The IRS has strict rules governing the use of independent contractors. Misclassified contractors are a favorite target of IRS auditors.And it's easy to slip up because the rules are complex.
Employee or Independent Contractor? You should also be aware of special rules governing so-called statutory employees who are sometimes misclassified by businesses as contractors. Read up on statutory employees in the IRS Employer's Supplemental Tax Guide.

Collect, pay and record payroll taxes

If you have employees, it's your responsibility to make all required payroll deductions. The IRS takes this responsibility very seriously and can be harsh on business owners who slip up. The task is especially important for restaurant owners who are required to make deductions for tips.
IRS guidelines for employee taxes. Business software like QuickBooks can help automate the payroll deduction process for you. You'll also need to keep records for four years. To find out what records you need to retain, review this checklist of employee records.

Keep good records on all cash transactions

If you're in a business that handles a lot of cash, you can expect the IRS to be suspicious. Cash doesn't leave as distinct a paper trail as other transactions. If you're living the high life but reporting low income from a cash business, don't be surprised if an IRS auditor knocks.
cash payment over $10,000 as required by law.

Regularly view your anti-audit defenses

At least once a year, check your IRS compliance situation, preferably with your accountant. Tax time is usually most convenient and allows you to make any necessary adjustments before filing.
  • IRS rules are complex and honest mistakes are possible. If you make an honest mistake, be sure the IRS auditor understands that. The difference between negligence and fraud is significant: penalties of 20 percent versus 75 percent.
  • The IRS isn't always right. If you feel you've been wrongly slammed by the IRS, you have the right to appeal.
  • Learn from your mistakes. Once you've been audited, you'll never want to go through it again. You can't make your business audit proof, but you can dramatically lower the odds of a repeat visit.