Top 3 ways to reduce chances of a TAX AUDIT

Audit for Tax

Some of the audits are random, with nothing the individual taxpayer did to generate many audits are instigated by the taxpayers themselves. An audit is simply the Income Tax Department (IT Department) double-checking your numbers to make sure you don’t have any discrepancies on your return.

IT Department conducts audits to minimize the tax gap or the difference between what the IT Department is owed and what it has received. It usually selects taxpayers based on suspicious activity.

3 Ways to Avoid the Tax Audit

1. Maintaining Good Records- By developing the habit of keeping and maintaining primary and secondary records all year round. And using a personalized filing system to keep the records close to the right tax return. In this way, preparing for a tax audit can be tackled smartly. Primary records like bills and receipts. Secondary records could be anything like spreadsheets and any other sort of summary info that might be important. Documentation mismatch must be double-checked to get a better tax position.

2. Reporting Income Earned- Tax audits can be mind-boggling and complicated. By, providing the complete information about the earnings, expenses, and deductions with accurate documents and keeping everything in a neat and simple format for the auditor to have a look at so that the taxpayer will not bear the burden of proving that the information provided is incorrect.

3. Knowing the Benefits of Filing Income Tax Return- The most important benefit of paying taxes and filing the income tax return is that only the income disclosed by you in your income tax return is considered your true income. If you are required to show your income at any place in the future, only the amount disclosed on your income tax return would be considered valid proof of your income. Moreover, even if you apply for any Loan from a Bank, you are mandatorily required to show them your income tax return and only the income disclosed in this income tax return would be considered as a valid source of income.

All income-earning individuals should file their income tax returns before the due date which will reduce the chances of being audited for tax.

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