Taxation & Estate Planning

?Tips for Avoiding IRS Interest

By Darrin Mish

Do you know the best way to deal with an IRS audit? It is to avoid it altogether. You may not know this, but whenever you submit your tax returns, it is scrutinized by a giant computer for anything amiss. When the number of anomalies exceeds a certain limit, your return is flagged by the computer and subsequently audited by a real person from the IRS. So how can you keep your return from being the subject of an audit? Read on for some useful tips.

No one wants to pay more taxes than they should. In fact, most people try to get away with paying as little as possible. As such, they make all sorts of deductions and declare dependents to lower their tax bill even when they are not true. But these actions often backfire. So the first tip is to simply be honest with your returns. If you aren't lying on your form, it will not matter if you get audited because you have your receipts and all your other information that proves your return is accurate. However, being honest means that you will be paying your fair share to the IRS and many people do not want to do that.

If you want to stretch the truth, you should at least make it believable. If your salary is $20,000 a year, don't declare that you made a $5,000 donation to a charity. This is an obvious red flag and a very easy way to get audited. Your deductions, should commensurate with what you earn. If you are self-employed, be careful with what you write-off since your forms are evaluated more stringently than someone filling out the 1040EZ.

Another thing you may be tempted to do is to falsely declare your total income so that you qualify for the earned income tax credit under the ARRA. Now that would be a huge mistake because your employer is also telling the government exactly how much you made each year, so if you lie, they know that someone is not telling the truth. Avoiding IRS interest is easily done by not being avaricious and if you want to fib a little, make it a white lie and not something that suddenly cuts down your tax dues by more than half of what it normally has been.

Another thing that draws unwanted IRS interest to your case would be when you make late returns. Late filings often get a special look at by the IRS because they often find that the late ones are the ones with the most to hide. Avoiding IRS interest is not very difficult as long as you don't make any stupid moves. The best way to do so is to be honest.

?Tips for Avoiding IRS Interest is a post from: IRS Tax Problem Solver Blog - IRS Help

Full post as published by IRS Problem Solver Blog on February 12, 2010 (boomark / email).