By: A.J. Cook


Here are two rules to live by: never wave a red flag in front of a bull and never put information on your tax return that will trigger an audit.

The first rule is easy. But what items on a return will grab the attention of the Internal Revenue Service, and which of these can you avoid?

Some facts that cause audits an honest taxpayer can't withhold, like very high income. But there are a number of things you can control, like refraining from writing superfluous notes on the return. Remember, IRS employees aren't paid for their sense of humor or to champion social causes. Here are three examples of notes that triggered audits:

• Martin Bradley wrote that his allegiance was to the law of God and not the warlike acts of the United States.
  
• Dr. John A. Garcia of Austin, Texas, frequently added messages including a fill-in-the-blank for IRS auditors.
  
• John H. Hoefker, from Taylor Mill, Ky., typed the following: "...because you all have so many thousands of laws and regulations there is no way I can be sure I complied with all of them."
  

The primary tool for selecting victims are IRS computers. These monstrous machines scrutinize each return, kicking out those likely to yield the most revenue. These mechanical brains choose for audits returns with any of the following:

• Several dependents.
  
• Large gross income.
  
• Dependent exemptions claimed by a non-custodial parent.
  
• Huge tax shelter losses, especially bogus shelters.
  
• Higher than average deductions for taxpayer's occupation or income level.
  
• Large losses from hobbies that don't have profit potential.
• Income much lower than amounts shown on reporting forms the IRS received from companies, without a good explanation by the taxpayer.
  

The computer also likes suspicious business costs and large deductions for donations, casualty losses and home office expenses.

Planning Tip: Here are the dos and don'ts on how to reduce your chances of being audited:

Do:

• Be neat and legible.
• File on time (including extensions).
  
• Include all required forms and supplemental documents with your return.
  
• Report even small income amounts. This indicates you are what you are - - an honest taxpayer.
  
• Hire a competent person to prepare your return if it is complicated; don't ask Uncle Fred or Brother Paul to do it.
  

Don't:

• Take unreasonable deductions.
  
• Group your business expenses as miscellaneous, put them under separate headings.
  
• Round off to the nearest $50 or $100. The IRS assumes these are estimates. It doesn't like estimates.
  
• Deduct $15,000 for a hobby with income of $1,200 without explaining why you aren't making a profit.
• Give the IRS too much information. If you attended a trade convention in Hawaii, don't show it on your return as "Hawaii trip," call it "trade convention."