While the selection of tax returns for audit is primarily done randomly, there are certain “red flags” that could increase your chances of being selected for an audit. Here are some examples of red flags that may trigger a tax audit:
If you have a high income, you may be more likely to be audited. The IRS tends to focus on taxpayers with high incomes, as they often have more complex tax situations and may be more likely to make mistakes on their tax returns. This is the most common type what triggers a tax audit.
Failure to report all of your income is one of the most common triggers for a tax audit. This could include unreported wages, rental income, or other types of income.
Large deductions, particularly in relation to your income, can raise suspicions with the IRS. Deductions that are not properly documented or appear excessive may also trigger an audit.
If you are self-employed or own a business, the IRS may be more likely to audit your tax return. This is because self-employed individuals often have more opportunities to claim business expenses that may not be legitimate.
Home office deductions:
Claiming a home office deduction can also increase your chances of being audited, as this deduction is often abused by taxpayers who do not qualify for it.
Foreign assets and income:
If you have foreign assets or income, the IRS may be more likely to audit your tax return. This is because taxpayers with foreign assets and income have additional reporting requirements and may be more likely to make mistakes on their tax returns.
It is important to note that the presence of one or more of these red flags does not necessarily mean that you will be audited. However, being aware of these potential triggers can help you avoid mistakes and ensure that your tax return is accurate and complete