Tips to Avoid the Taxman’s Wrath

No one likes the IRS, and you’ve likely heard nightmare stories of friends, family, or colleagues having their taxes audited by the IRS. All of us want to avoid an IRS audit to keep our stress level at a manageable level, and here are a few simple and advanced strategies available to you now to stay off the IRS’s radar:

1. If you use TurboTax or TaxCut and file your taxes yourself, there is an Audit Review feature in the software that will tell you how likely you are to be audited. Don’t be afraid to take every deduction you qualify for; many people don’t take deductions they should take because they’re afraid of the IRS. Take your deductions, and use the Audit Review feature in your software to make sure you’re not likely to be audited. I did this from 1999 to 2004 and never had a problem. BTW, the guys at H&R Block usually prepare your taxes with TurboTax or TaxCut- ask them if they have an audit review feature in the program they use to do your taxes. And if you do your own taxes, you should be using TurboTax or another software- in addition to the audit review feature, for around $20 more (or with some versions it’s included) they’ll deal with the IRS for you in the unlikely event you ARE audited. A nice feature for a small price.

2. Here’s a little-known trick to greatly reduce your odds of being audited: ALWAYS file for an extension to file your taxes. This tip comes from an ex-IRS agent. What happens when all the taxes come in by April 15 is that tax agents have big piles of returns to go through. They put the ones that appear “a little off” in a pile of returns likely to be audited. They go through the rest, then they carefully go through the ones that they’re more likely to audit. By filing for an extension every year, you accomplish two positive objectives- first, your CPA or accountant that files your taxes will love you because you’re not pressuring him the beginning of the year like everyone else is (”Did you get my taxes done yet?!”), and second, you’re GREATLY reducing the chance of being audited because the IRS agents who review your return will likely be done going through their “audit pile” by the time they receive your tax return. Cool, huh?

3. This one is way more advanced- only do this one if you’re willing to do a little extra work to greatly reduce your taxes. There is a little-known loophole in the law that allows a Roth IRA to own a company. If you have a 9-5 job, why should this matter to you? By setting up a Roth IRA (if you don’t already have one) and forming a company, you can give yourself an instant 20% pay raise. I KNOW it sounds too good to be true, but it’s not. I’ve personally met dozens of people who have benefitted from this “tax structure,” I use it myself, and it’s been upheld in U.S. court as a perfectly legal, ethical way to greatly reduce your taxes. To learn more, you can go to www.YourProsperityPower.com or www.FinancialSuccessBlueprint.com. (Hint: if you decide to check out either of these items, get my book at www.FinancialPlanning202.com to give yourself a nice discount.)

You don’t have to overpay your taxes, and you don’t have to fear an IRS audit if you take a few simple steps to protect yourself. Get some audit protection, take your deductions, and ALWAYS file an extension to get your taxes done. If you want to give yourself an instant pay raise of 20% or more and you’re willing to do a little work to get it, get more informed at the websites above. It’s your money; the only question you have to ask yourself is how much of it do you want to keep in your pocket and how much do you want Uncle Sam to keep stealing out of your pocket when you’re not looking?