Part Two Of Two

And what will be the result? That will depend on how accurately your
return was completed, how well you handled the audit interviews, and your
auditor’s opinions about what are allowable deductions (and, of course,
whether he and his wife are getting along). And that is why we become so
frustrated - some of these matters we have absolutely no control over.

But whatever the result, be prepared to pay. It will, no doubt, cost you
money. Sometimes they decide that you did a good job of deciding what to
put on the form, so you don’t owe them any money. Sometimes they will
disallow a deduction or change a depreciation schedule or something so you
do owe them some money. Whatever the auditor decides, you will more than
likely end up owing your tax preparer for his services. But cheer up! You
probably won’t end up in jail - unless, of course, you have been
deliberately defrauding the government. But even then, a check can usually
buy forgiveness.

So an audit isn’t the end of the world. But it is tense and frustrating
and most of us would like to avoid it.

What are your chances of being audited and how can you reduce them?

Well, every year more than two million “invitations” are sent out to
reluctant guest (not many of these invitations are declined, by the way).
Most of the time, you are chosen for an audit by a computer program. The
computer scans returns looking for items that may indicate an error. Large
deductions in comparison to your income is one. Some are randomly selected
by the computer that have no questionable items.

Some types of deductions that auditors examine closely are those that you
are not likely to have adequate documentation for. If you have had losses
due to vandalism, accidents, floods, fires, storms, and the like, you may
be picked for an audit.

Since child care is often paid in cash. If you have a large claim for
child-care expenses, be sure to document it carefully. Get receipts.

Charitable contributions are carefully checked. For your protection, always ask for receipts to back your claims.

Also, handle auto and entertainment deductions carefully.

If your return has been examined in one of the two previous years for the
same items they are questioning this year and that audit resulted in no
extra payment, you can call the IRS. The audit will likely be suspended.

Once the computer kicks out your return for audit, will you automatically
be audited? No. Your return is reviewed by IRS employees, and they make
the final decision on whether or not to audit your return.

You can stop the process right there. In fact, many returns that have been
kicked out are never audited. Some people never even know that their
return was chosen by the IRS computer for an audit!

So, what can you do to stop the IRS from auditing you? Prepare your return
correctly. If it is apparent that there is no error on it, the IRS
employee who reviews it will overturn the computer’s decision and you will
not be audited. If you have unusual or unusually large deductions,
include proof of the deductions with your return- receipts from charities,
receipts for other deductions - so that the reviewing agent will know that
you have not made an error and to convince him that there is no need for
examining any further. (When you include receipts or proof with your
return, always be sure to keep a copy for your records.) He will overturn
the audit - and you will probably never know that the IRS computer picked
your number! Check here for tax attorney listing;
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