Improving Your Odds

According to the Kiplinger website, slightly more than 1 percent of tax filers are audited annually, but the odds that a tax payer will be in that 1 percent jump dramatically as income increases. Taxpayers with incomes over $1 million stand a one-in-eight chance of an audit. Cut the odds of triggering an audit by taking care to complete the 1040X amended return correctly and legibly. Clearly explain deductions that result in a refund. Attach receipts and additional forms that the IRS requires. This is especially important if you claim items that the IRS examines closely like large charitable deductions, transactions with family members, property losses and unreimbursed business expenses. On the 1040X, you list only amounts you are changing. Report all income, including foreign bank accounts or income. The IRS receives copies of your W-2 and 1099 forms, so a discrepancy is a red flag.

Amending When Audited

Filing an amended return during an audit can cause confusion. Talk to the auditor about possible changes and file the amended return after the audit is over. You have three years from the date of the original filing to file an amended return.