Report all your income. You must tell the IRS about every penny of income that you make, including stock dividends, cash payments, gambling winnings, jury-duty payments, and unemployment benefits. The amounts must match the forms that are submitted to the federal government by your employer, banks, or third-party payers. If there is even one digit off, the IRS could note the mismatch and generate an inquiry.
Be cautious when claiming deductions. Be prepared to back up every deduction—particularly car write-offs, charitable contributions, and business purchases—with written documentation, especially if you are self-employed or make more than $100,000. And be precise: Deductions rounded to the nearest hundred-dollar amount could up your risk. “That signals you are not keeping records,” says Frederick W. Daily, author of Stand Up to the IRS (Nolo, $35, amazon.com).
Check your work. A simple math error won’t automatically trigger an audit, but it can give the IRS a reason to revisit your return, which increases the odds that it might find other problems. When figuring your taxes, check your math. Twice. Or hire a reputable tax preparer (but never sign your return until you have reviewed it). You can also use a computer program, like Turbo-Tax. The software won’t make silly mistakes.