How ‘audit-proof’ is your tax return? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

How ‘audit-proof’ is your tax return?

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in Employment Law,Human Resources,Small Business Tax,Small Business Tax Deduction Strategies

The numbers are deceiving: IRS gum-shoes audited only 0.57 percent of individual tax returns in fiscal year 2002. The rate isn't much higher (only 1.45 percent) for Schedule C filers with incomes above $100,000.

But the free ride is over. The IRS began revving up its audit machine last year as it recovered from budget and personnel problems. So while taxpayers who played "audit roulette" in recent years were fairly safe, the battle has been joined in 2004.

Advice: To make sure your 2003 return flies under the IRS radar, know the key 'red flags' that catch auditors' attention. When such red flags are unavoidable, just make sure you keep your recordkeeping solid.

5 business-return 'red flags'

1. Failing to match up K-1s, 1099s. Last year, the IRS began matching Schedule K-1s—which report income from S corporations and partnerships—to owners' returns. So it's especially vital this year to reflect the correct K...(register to read more)

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