5 IRS Audit Red Flags

Tax Prep & Filing

Tax Day Tip: 5 IRS Audit Red Flags

Certain things on your tax return could attract unwanted attention from Uncle Sam.

Although there's no sure way to avoid an audit, these red flags could increase your chances of unwanted IRS attention.

See Also: 23 Most Overlooked Tax Deductions

1. Failing to Report All Taxable Income

IRS computers are pretty good at matching the numbers on the forms with the income shown on your return. A mismatch sends up a red flag and causes the IRS computers to spit out a bill.

2. Running a Small Business

Schedule C is a treasure trove of tax deductions for self-employeds. But it's also a gold mine for IRS agents. They know that self-employeds sometimes claim excessive deductions and don’t report all of their income.

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3. Taking Large Charitable Deductions

If your charitable deductions are disproportionately large compared with your income, it raises a red flag.


4. Claiming Rental Losses

The IRS is actively scrutinizing rental real estate losses, especially those written off by taxpayers claiming to be real estate pros.

5. Claiming the Home Office Deduction

The IRS is drawn to returns that claim home office write-offs because it has historically found success knocking down the deduction.

Check out 12 more red flags that could raise your risk of an IRS audit.

See Also: 7 Ways to File Your Taxes for Free