The odds of being audited by the IRS are low. Fewer than 1% of tax returns are singled out for review. Your chances can go up, though, if you raise certain red flags. Here are three of them.
Reason #1: You make too much money
Audit odds go up as your income goes up. Make more than $200,000? There's a 1-in-37 chance your return will be audited. Make a million? It’s 1 in 13. But if your income is less than $200,000, the rate drops to just 1 out of 128 returns. (To see where you rank as a taxpayer try our simple tax calculator.)
Reason #2: You run a small business
Running a small business can attract the attention of IRS agents, who know from experience that self-employed taxpayers sometimes claim excessive deductions and don’t report all income. Special scrutiny is given to cash-intensive businesses such as taxis and hair salons.
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Reason #3: You make large charitable deductions
The IRS knows the average charitable donation for taxpayers at your income level. If your donations are unusually large, they might draw attention. Keep receipts and get appraisals for valuable donations.
There are 13 more tax audit red flags you should know about. Take a look.