I wish I could tell you there's a magic solution to staying out of the cross hairs, but the reality is that lots of people get audited every year. This shouldn't scare you though, because there's some simple things you can do right now, even before you file a return, to protect yourself.
Most taxpayers can avoid an audit simply by keeping good records and preparing an accurate return. With the ever-changing nature of our tax laws, it's best to use tax prep software or an accountant to help with your annual filing.
Not surprisingly, software companies have put some extra resources around audit issues. Both TurboTax and TaxCut have special features to help assist you with an IRS audit.
Working with an accountant can help protect against audits too. We are trained to ask questions to make sure you qualify for various deductions and credits. And it also helps that accountants tend to keep a rather sizable paper trail, so finding documents when the IRS asks for more information generally isn't a problem. However, hiring a less scrupulous accountant can actually increase your chances of getting audited. But there's some easy ways to spot tax preparer fraud such as making up expenses or deductions out of nowhere, refusing to sign the tax return that they prepared, asking you to sign a blank tax form, or basing their fee on a percentage of your refund. Unfortunately, if a tax preparer files an incorrect return, you will still be on the hook for the underpaid taxes, so it's best to make sure your accountant is reputable and review your tax return thoroughly.
Freelancers and self-employed professionals can help prevent an audit by keeping enough records to substantiate their income and deductions. The IRS loves to audit Schedule C filers because the IRS often suspects they have less than ideal documentation. Investing some time into using a small business accounting program could really pay off by helping you maintain good records. People who work from home are scared of claiming the home office deduction, although in fact this has become less of an issue, at least as far as I can tell from dealing with audits. And one last audit tip: keep receipts for all donations of cash or goods to charity.
For more tips, see How to Avoid an IRS Audit.