Avoiding the 'A' word.

• Author: Vento, John J.
• Position: DOLLARS & SENSE

AUDIT is a word that strikes fear into the hearts of taxpaying Americans everywhere. Even if an audit does not end up being painful (to your bank account, that is), it is a stressful hassle that no one wants to deal with and, with tax day just around the corner, many people are anxious to do whatever they can to avoid hearing the "a" word in the future. The good news is that there are a lot of things taxpayers can do to minimize their chances of being audited. If you take a little time to learn about what often sparks audits and take some wise precautions when preparing your returns, you should be able to face April 15--and beyond--with peace of mind.

The average American family pays more than one-third of its income in Federal, state, and local income taxes--and even more in property taxes, excise taxes, sales taxes, and other hidden levies, such as taxes on cigarettes, liquor, and certain luxuries. Tax laws are incredibly complicated, and it is very difficult for the average person to understand the virtually infinite ins and outs of the often arcane Tax Code. A professional tax advisor not only can help you make sure that nothing the Internal Revenue Service wants slips through the cracks, he or she can ensure that you benefit from tax strategies and do not overpay.

Certain items can trigger an audit: a sudden increase in income; returns missing a signature; or itemized deductions that are exceedingly high, or higher than previous years or the average of others in the same tax bracket. Working in an occupation that lends itself to cash income (such as being a server or hairdresser) or being self-employed also makes it more likely that the IRS will check up on you, as does preparing your own returns. Anytime the IRS suspects that you may not be paying your full share of taxes, you can expect it to verify that all is as it should be. Even entering round, "tooperfect'' numbers on your returns can arouse suspicion.

If it does audit your taxes, the IRS will be looking to see that all income received was reported properly and that any and all deductions are legitimate. As a result, it is imperative that you keep complete and accurate records, especially for areas in which people tend to, shall we say, overstate the truth. These include business travel expenses, charitable deductions, and expenses for your home office, if you have one-- and, no matter what you are reporting, before you send your returns in, double-check them to make sure that...