IRS AUDITS - HOW TO AVOID THEM

According to the Associated Press, the best way to avoid an IRS audit is to earn less than $200,000. Tax returns showing less than $200,000 go unaudited 99 percent of the time, according to the AP report.

For those with income above $200,000, there is a 3% chance of audit. Earnings of $1 million or more are audited 6% of the time. These percentages apply to both single filers and joint returns.

Another bonus for those under $200,000 in adjusted gross income is that the number of audits for that category remained constant from 2008 to 2009. On the other hand, the numbers of audits rose 11 percent for those with more than $200,000 in income, and 30 percent for returns showing $1 million or more in income.

According to the AP report, the IRS conducted a total of 1.4 million individual return audits during the financial year ending September 30, 2009.

Although not mentioned in the AP report, it is widely thought in the 1031 exchange industry that participating in an exchange is not in itself any sort of red flag or trigger for additional scrutiny.