Probably the dumbest question I'm asked about taxes is this: What are the red flags that will trigger an audit? Admittedly, one reason I think it's a dumb question is because I can't answer it. What sets the IRS computers all atwitter is if the picture you paint of yourself on your return seems out of place -- a Picasso among the Rembrants. Like claiming that you gave 65% of your income to charity, say, or reporting tiny business income but massive business expenses.
Frankly, though, Americans worry far too much about audits. First of all, very few returns are audited. So few, in fact, that the new head of the IRS is asking the Congress for hundreds of millions of extra dollars to beef up his auditing crew. Even if he gets all the money he wants, only a tiny percentage of returns will be run through the IRS wringer.
Second, you only have to worry about an audit if you're cheating. And I'm sure you wouldn't dream of that.
Why on earth even consider passing up a legitimate deduction, even if it were a red flag for an audit? If you can back up what you put on your return, the IRS will go away empty handed. It happens a lot more often than you might think: Nearly one in four audits results in NO change in what the taxpayer owes.
Yes, we're suppose to worry about the IRS. That's one of the main weapons to keep us on the straight and narrow. But it makes a lot more sense to spend your time figuring out how to exploit the legitimate breaks in the law -- and there are lots of them.
GETTING STARTED
