Avoid an IRS Tax Audit

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The Internal Revenue Service has gotten much leaner lately. The Center on Budget and Policy Priorities recently estimated that funding for enforcement is 20% below where it was in 2010.

But if you think hard times at the IRS mean easy times for tax filers, think again.

Like so many things, the tax filing process has come to rely on more automation and fewer discerning human beings. That means all you need to do is befuddle one computer program, and you could be in trouble.

“Robo-audits” of taxpayers are increasingly common, said James Keller, executive editor with the tax and accounting business of Thomson Reuters, and are going to “become a bigger and bigger deal” when it comes to tax time.

That means it’s more important than ever to leave no guesswork on your returns, because computers aren’t capable of giving taxpayers any benefit of the doubt.

To reduce your likelihood of an audit come tax time, here are some common reasons IRS auditors and their computers may be suspicious about your return:

• Typos and bad math: If the form you get from your employer says one number and you input a different figure into TurboTax, you could open the door for an IRS audit. Common sources of IRS inquiries are “W-2s or 1099s that do not agree with the return,” said John Piershale, a certified financial planner at Piershale Financial Group in Crystal Lake, Ill. To save yourself some headaches, double-check your numbers and income sources when you file.

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Source: USA Today | Jeff Reeves

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