How to Reduce Your Already Low Risk of a Tax Audit

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For many American taxpayers, just hearing the words “IRS audit” is enough to send them into a panicked frenzy. In reality, your chance of triggering an IRS tax audit is incredibly slim.

According to the Associated Press, the number of taxpayers audited by the IRS has been on the decline for six straight years. In 2016, a little more than 1 million people were audited — the fewest since 2004, when the U.S. had 30 million fewer people.

Budget cuts have forced the agency to downsize by more than 17,000 employees since 2010, the AP reports.That means the agency has lost nearly one-quarter of its enforcement staff.

IRS Commissioner John Koskinen tells the AP that fewer IRS agents mean fewer tax audits, potentially costing the federal government between $4 and $8 billion a year in uncollected taxes.

How to reduce your risk of audit

Although you probably won’t be audited by the IRS, there are things you can do to protect yourself from extra IRS scrutiny, including:

  • Don’t claim a hobby as a business. Remember that a business is something that makes money. “If you haven’t made money in three years, what you have may actually be a hobby,” we write in “Tax Hacks 2017: Missteps That Will Get You Audited.”
  • Double check your math. This is perhaps the simplest mistake you need to avoid because addition and subtraction errors on your return can trigger a tax audit. “Avoid this audit trigger by using tax software or an online program that will virtually ensure the calculations are correct,” the story states.
  • Make sure you claim all of your income. The IRS knows a lot about you and your money. Don’t try to hide your income from them — like the extra cash you earn freelancing or your gambling winnings. If you do, you run the risk of having your taxes flagged for an audit, we warn in “Beware These 10 Common and Costly Tax Mistakes.”

If you end up among the unlucky few taxpayers who receive an audit notice from the IRS, check out “11 Tips for Surviving an IRS Audit.”

Have you ever been audited? Share your experiences below or on Facebook.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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