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How to Avoid an IRS Tax Audit. When you're preparing your taxes, keep in mind that certain
claims may raise a red flag. You will need Reasonable claims and proof of deductions
and losses. Step 1. When it comes to your charitable deductions, don't wildly exaggerate
your generosity. Anything above $1,600 per year, per family is eyed skeptically by Uncle
Sam. If you're audited, you'll have to document any deduction over $250. Step 2. Use precise
figures. The IRS is immediately suspicious of any deductions rounded to the nearest hundred
or thousand. It indicates you're guesstimating a figure that you probably can't prove. Step
3. Don't insult their intelligence: If you simultaneously claim a tiny self-employment
income and a large number of dependents, the IRS is going to wonder how you're supporting
so many on so little. Step 4. You'll also arouse suspicion if you're running a side
business whose losses conveniently wipe out your salaried income taxes, or your business
reported a large income but supposedly netted very little profit. If your small business
is a substantial money loser two years in a row, expect IRS scrutiny. Step 5. File cautiously
if you're in a cash business that makes it easy to hide income, or if you are a professional
who owns their own business and does your own bookkeeping. These tax returns are more
likely to be audited because the potential for cheating is greater. Step 6. If you're
self-employed and manage to earn the exact amount of money that entitles you to the maximum
earned income tax credit, the IRS may want to verify your good fortune. Step 7. The more
money you make, the more care you should take, because your chance of being audited rises
with your income. It's not just the little people who pay taxes! Did you know People
who make between $25,000 and $100,000 have a seven in 1,000 chance of being audited.