In life, there is the unavoidable law of attraction. Bees fly toward the most colorful flowers. Kids run at the sound of an ice cream truck. There are also certain elements of a tax return that an IRS auditor finds irresistible.  Actually, it’s the IRS super computer called Discriminant Inventory Function System that really falls in love with certain returns.

The IRS software works on a top-secret algorithm that scores every return to determine whether or not the IRS will audit it. Yet, there are certain basic items we know it checks for.

1. Errors or inconsistencies are an easy one. One typo on one line could result in the auditor taking a look at every line. If you forget to fill in your occupation or put retired but have a W-2, you just might receive a letter from the IRS.

2. A significant income increase or decrease can catch the IRS’ eye.

3. High itemized deductions compared to low income will have an auditor wondering how you could be so generous or pay such a big mortgage payment without going broke.

4. Are you deducting big meals, entertainment or travel?  It’s hard to prove that your last meal at The Palm was a business meeting, especially if it was on your anniversary.

5. Home Offices give auditors that warm and fuzzy feeling. In fact, the IRS especially enjoys giving lots of attention to the self-employed.

6. Filing late without applying for an extension is a big no-no.

7. And if your business is showing a substantial loss but there’s no advertising expense or other evidence to indicate you are operating a going concern for profit, the auditor will probably be smiling.

What does this means to you? Most of these seem obvious and even common sense. Minimize your risk if you can. Of course, if you’re self-employed then you’re self-employed. But there are a few things you can do to increase your chances for a good outcome if you’re audited. The most important is to understand and follow the rules. The next three in no particular order are: 1. Documentation, 2.Documentation, 3. Documentation!!