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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: audits - a slightly off-topic rant Date: 11/7/2002 3:46 PM
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In an earlier thread, an individual wondered about taking a deduction for automobile expenses associated with charitable work. In particular, he was concerned that perhaps it would be a red flag which would trigger an audit. I (and one other respondent) replied that of course he should take the deduction, provided it was genuine and properly documented. But that got me to thinking about this irrational fear of audits, which I suppose the IRS more or less carefully cultivates, since presumably it's the fear of being caught that causes us to do our taxes carefully and conservatively, or even to file them at all. I think that's the wrong approach.

The right approach is to learn all the rules and follow them carefully. If you're scrupulously honest in preparing your return and have all the supporting documents, then you have no reason to fear an audit, however much your return might deviate from the norm. When deciding whether to claim a deduction, include a miscellaneous bit of income, or calculate the basis of an asset in a certain way, you should never concern yourself with audit flags. Instead, ask yourself: "Am I entitled to do this? Do I really understand the rules? Do I have the right documents with which to defend my choice?" In short, is this right? If so, then do it; if not, then leave it on the table.

Lorenzo

Mandatory disclosure: I've never been audited. I'm not sure I would exactly enjoy the experience, but neither would I shrink from it. And while it might take me a few minutes (well, ok, maybe days) to round up all my paperwork, I'm confident I could do it.
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