REDUCE YOUR TAX PROFILE

Avoiding Tax Audits

Simple Guideline to avoid tax audits

1. Don't claim shady deductions.
Be reasonable about every item on your return, including claims for a home office, money-losing fun hobby, travel for business.

2. Use a professional tax preparer.
If really complex or questionable, use a lawyer that is a tax preparer to retain full privacy.

3. Don't file electronically.

4. Check your math.
Make sure you add, subtract and multiply accurately. Check your numbers through each step and do some simple math checks when you finish.

5. Account for every Form 1099.
The Form 1099 comes in many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payers of such funds to both you and the IRS. So regardless of how many 1099s you receive, make sure they all are accounted for on your return. There are also Forms 1098 which lenders send (to you and the IRS) recording how much interest you paid. The IRS matches your return against the 1098s and 1099s. So one way to guarantee an IRS query is to fail to include each 1099.

6. Disclose just enough.
Be concise, truthful and accurate, but don't provide copies of sales agreements, settlement agreements, bank statements, etc., unless you are later asked to by the IRS.

7. Assemble your return correctly.
Follow the IRS instructions for assembling your return.

8. If you receive a small bill, pay it.
It usually doesn't pay to fight with the IRS, so if the tax bill is small, don't get into the system and risk bigger problems for a few dollars. Just pay it and move on.

9. Don't amend a tax return unless really necessary.

10. Don't ask for your money back.
If you are entitled to a refund, consider applying it to your next year's tax payments, rather than asking for the refund in cash. You'll have a lower profile if you file a return applying a refund to future taxes.

11. Protect yourself, your assets, and your privacy with a Private Asset Trust.

No matter how careful you are, there's no way to guarantee you'll never have a tax controversy. Sometimes your number just comes up. Audit rates for most types of tax returns are very low. You can make it lower.

Portions and references are from Forbes Magazine.