Solutions

How to Safeguard Yourself Against an IRS Audit

• Choose a Reliable Tax Preparer: Avoid tax preparers who promise unusually high refunds without verifying your deductions and credits. Such practices often lead to audits. Opt for a preparer who adheres to tax laws and ensures all deductions are legitimate. Remember, you are ultimately responsible for any additional taxes, penalties, and interest.
• File Your Returns on Time: To avoid failure-to-file penalties, ensure your tax returns are submitted by the due date. Penalties for late filing can be as high as 25% of the tax due, or up to 75% if deemed fraudulent. Even if you can’t pay the full amount, timely filing helps you avoid these hefty penalties.
• Report All Income: Accurately report all income, including amounts from Form 1099s. Failing to report income can trigger an audit, resulting in additional taxes, interest, and penalties.
• Be Cautious with Home Office Deductions: Only claim a home office deduction if it’s your primary place of business. Misuse of this deduction can lead to taxable gains when you sell your home. Ensure you have adequate documentation if you claim this deduction.
• Document Business Losses: If you report significant business losses, be prepared to provide evidence of how you funded these losses. The IRS will scrutinize large losses and require documentation of non-taxable income or asset sales.
• Avoid Hobby Loss Claims: Deductions for activities that might be classified as hobbies need to be carefully documented to show they are for profit. Maintain separate accounts and business plans to demonstrate your profit intentions.
• Maintain Documentation for Charitable Donations: Keep accurate records and appraisals for donated property. Only claim deductions for donations you can verify with cancelled checks or receipts.
• Document Casualty Losses Thoroughly: For casualty losses, maintain records of your property’s adjusted basis, insurance reimbursements, and appraisals before and after the incident. Report theft losses to the police and obtain a police report.
• Prepare for an Audit: Ensure you have all necessary documentation ready to support the information on your tax return. Being prepared can streamline the audit process and prevent issues. Ensure you have all necessary documentation ready to support the information on your tax return. Being prepared can streamline the audit process and prevent issues.
• Seek Professional Help: If you receive an audit notice, contact Clarity Tax Resolutions immediately. Our team, led by former IRS agents, will provide the expert defense you need to navigate the audit process successfully.

• Expertise: Leverage our deep understanding of IRS procedures and tax resolution.
• Comprehensive Defense: We offer a thorough strategy to protect your rights and address audit-related issues.
• Effective Advocacy: Rely on our proven methods to achieve the best possible outcome for your case.