3 Reasons You Might Get Audited by the IRS

Odds of a tax audit are actually quite low, but some things can raise them.

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.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

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.