Friday, November 6, 2009
While what-triggers-an-audit theories abound, there are some basic things you can do to reduce your chances of being picked for an audit or at least to make any interactions with the IRS less traumatic. ...
3. Don't file electronically. I'll take considerable heat for my opinion on this, since the IRS encourages electronic filing, as do many accountants. In fact, the IRS boasts that two out of three 2008 returns were filed electronically. Clearly, electronic filing is the thing of the future and will be required for every return someday soon.
Until then, I suggest filing the old fashioned way, particularly if you're worried about an audit. Why? Paper filing means it's more work for the IRS to access all the information in your return. Your duty as a taxpayer is to be truthful and accurate, but you don't have to make it easy for the IRS.
Before I get a blizzard of e-mails about my view of electronic filing, I recognize there are tradeoffs. Indeed, many people think electronic filing is the greatest thing since the mouse was invented. Electronic filing is faster, and if you are entitled to a refund, you can receive it faster. The cost (in time or fees paid to professionals or software providers) may be lower. You save paper, and you don't deal with the post office.
Yet you are giving the IRS easy electronic access to information it would otherwise have to enter, enabling the agency to examine your return and mine the data more easily than it otherwise could. If you still think I'm nuts, one variable may be the nature of returns. Most individual tax returns are short form (Form 1040EZ or 1040A). If your return is in that category, my anti-electronic filing mantra matters less if at all. But if your return is complicated, I'd stick with paper.