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The Internal Revenue Service looks at a lot of different factors in its audit screening and there are a variety of different things that could potentially be triggers for an audit.
One thing that can be an audit trigger is the information a person gave on their federal tax returns not matching information reported by third parties, such as information reported by a person’s employer.
Thus, being sure to be accurate in the information one reports on one’s tax returns, such as income information and information regarding assets in foreign bank accounts, can be very important. One thing that can help with keeping things accurate on one’s tax returns is keeping detailed documentation regarding one’s income and financial activities.
Another thing that can be a trigger of a tax audit is when something out of the ordinary is on a person’s tax return, such as a deduction level outside of the “normal” range.
Thus, it can be worthwhile to provide clear explanations to the IRS when including something out of the ordinary on one’s tax returns. This underscores a larger point that being very clear with the IRS in one’s tax returns may be able to help prevent misunderstandings that could lead to audits.
As this illustrates, solid preparation, clarity and diligence when it comes to one’s taxes can sometimes help with reducing the odds of an audit occurring.
These sorts of things can also be important if one does end up facing an audit. Audits can vary greatly in how they go. Some go rather quickly and smoothly. Others can be very long and have all sorts of complications. How a taxpayer acts leading up to and during an audit is one of the things that can influence which camp their audit falls into. Tax law attorneys can assist individuals who have received an audit notice with preparing for and navigating their audit.
Source: Barron’s, “How to Lower Your Audit Risk,” Karen Hube, Nov. 28, 2015