The odds of suffering through one of the IRS's renowned audits maybe small, but because the IRS keeps its methods of selection a secret, it can creep right up on anyone. There are ways that you can minimize your chances of being invited to this party, though.

Like going through airport security or customs, individuality and deviation from the usual will be deemed suspicious, and before you know it, the federal taxmen will be snapping the latex gloves and preparing for a full cavity search. If you want to avoid drawing their attention, try to be like everybody else in your demographic. For example, a single person making under thirty thousand dollars a year is unlikely to donate half of their income to charity. Likewise, a Wal-mart employee isn't likely to have many business-related expenses. It may be well worth your time to do some research and find out what people like you are most likely to report on their returns.

Speaking of finding things out, that's exactly what the IRS is capable of doing: the friendly neighborhood taxman receives every tax form (W-2's, 1099's, etc.) that you do, but, unlike you, they keep them filed away and organized - for years. If you've left out any gains, they'll know about it, so make sure that every tax form is kept safely away somewhere that's easily accessible. It's in your best interest not to "forget" about that $10,000 night in Vegas.

You'll want to remember your high school days and double-check your arithmetic. The IRS has computers that can automatically correct any errant human errors, but one too many of them will throw up a red-flag. These kinds of mistakes can be avoided by using tax-software (like Quicken), and using those kind of tools will have the added benefit of making your return neat and tidy, another area where the government can be quite anal.

The self-employed especially draw the suspicions of the tax officials. With these individuals, income can often be "hidden," and personal expenses may suddenly find themselves promoted to business ones. The IRS treats the self-employed as guilty until proven innocent, so if you run your own business, it's a really good idea to keep all of your records - that's right, every single scrap of paper with a number on it should be saved. There is a strategy that you, the entrepreneur, can use to get an advantage over the rest of us, though: the IRS audits corporations less frequently than they do individuals, and, as you are your very own business, you can take advantage of this by forming an LLC (Limited Liability Company). As an LLC, you can demarcate firmly between your business and personal lives, gain greater freedom when it comes to deductions, and most importantly, keep yourself out of the taxman's glare.

Lastly, you should prepare every tax return as if you've already been selected for an audit. Assume that someone is definitely going to be looking over your return, and attach notes, receipts, and spreadsheets to explain any deductions, expenses, or questionable figures. Be as specific as possible: if you've spent $2549.97 on business lunches, don't report it as $2550.00; keep every amount exact, right down to the decimal point. Never categorize anything as "miscellaneous," either; the IRS hates ambiguity.

These strategies will help you to stay off the IRS's radar, but you should keep in mind that they will also select a certain number of random returns to audit, regardless of their content. Even a perfect report can be selected for scrutiny, but if you follow the strategies outlined above, you should already be well-prepared to justify your return.

Learn more about this author, Michael Collins.
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