6 Red Flags That Can Trigger an IRS Audit
The thought of having their tax return audited by the IRS is a huge fear of many Americans.
Realistically, the odds of being audited are pretty low. Still, have you ever wondered what causes some tax returns to be audited and not others?
Today, we will talk about six red flags that could trigger the IRS to pay unwanted attention to your tax return.
What is an IRS Audit?
Simply speaking, an audit is a review of a business’s or individual’s accounts and financial information by the IRS.
The IRS is looking to ensure the information has been reported correctly and verify that the reported tax amount is correct.
Red Flag #1: Making Math Errors
This may sound simple, but many audits are triggered by basic math errors. When filling out your tax return, double-check that all of your columns add up correctly.
Even small errors can catch the attention of the IRS!
Red Flag # 2: Not Signing Your Return
Again, this may sound simple but not signing your return almost always guarantees extra attention from the IRS.
Be diligent, and make sure you sign that return!
Red Flag # 3: Your Income
Taxpayers with an income of over $100,000 are much more likely to be audited.
Even so, do not underreport your income. Just be mindful that the amount of income you have does make it more likely that you will be audited.
Red Flag # 4: Under Reporting Your Income
It may be tempting not to report some of your income. However, if you get caught, you will have to pay taxes on that income as well as fines and penalties.
Additionally, the IRS has multiple ways to track your income. They also get copies of all the 1099s and W-2s you receive.
In the end, it’s better to be safe than sorry.
Red Flag # 5: Overestimating Charitable Donations
Charitable donations make great tax write-offs, and they make you feel good.
However, if your charitable donations seem large compared to your income, this is a red flag for the IRS.
Be sure that your charitable donation claims are accurate and keep the proper documentation of any donation made.
Red Flag # 6: Overestimating Home Office Deductions
More Americans are working from home than ever, resulting in an opportunity for deductions.
However, you must be realistic with what you use in working from home and its cost. For example, deducting the full amount of your rent will send a huge red flag to the IRS!
What To Do If You Are Audited
Being audited by the IRS can be scary and stressful. Having representation vastly improves your chances for a successful outcome and can ease the anxiety and stress brought on by an IRS audit.
If you find yourself being audited, we urge you to reach out to a qualified tax professional for representation.
To schedule a free strategy session, click here.
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