IRS Audit Triggers (Top Tax Audit Red Flags)

IRS Audit Triggers

Top IRS Audit Triggers

An IRS audit is something that all of us as taxpayers never want and typically want to avoid. They are stressful, disconcerting and fraught with uncertainty. The Internal Revenue Service uses a combination of automated and human processes when selecting which tax returns to audit. That said, your chances of being audited or otherwise hearing from the IRS increase depending upon various factors, including your income level, the types of deductions or losses claimed, the business in which you’re engaged and whether you own foreign assets.

Although there’s no sure way to avoid all IRS audit triggers and in turn completely reduce the risk of an IRS audit, awareness of these IRS Audit Triggers could help reduce your risk for an IRS audit or prepare in the event of an audit:

  • Errors and omitted information: If you make a mathematical error or omit required information (such as an incomplete tax form), it could lead to an IRS audit.
  • Unreported income: The IRS receives reports of most income earned by US taxpayers. If you don’t report all of your worldwide income, whether wages, self-employment income or other income, it will contribute to your risk of a tax audit or an IRS notice with additional tax due.
  • Charitable donations: The IRS publishes information on the average size of charitable contributions for various income levels. If you take a deduction for an amount that is larger than the averages, you could be selected for an IRS audit.
  • Excessive expenses: Expenses, whether for business-use or unreimbursed employee expenses, must be both reasonable and necessary. Expenses claimed that appear out of the ordinary is one of the common IRS audit triggers.
  • Home office expenses: Claiming expenses for your home office, while valid, is one of the most well-known red flags of IRS audit triggers.
  • Round numbers: Round numbers appear suspicious and raise an audit red flag, simply because they appear randomly made up.
  • Foreign bank accounts: Checking the box indicating that you have a foreign bank account on Schedule B increases the likelihood of an audit, but noncompliance can result in stiff penalties and significant legal liabilities. The IRS continues to get information on many foreign bank accounts as a result of information sharing due to the implementation of FATCA.

Our goal at Tax Samaritan is to provide the best counsel, advocacy and personal service for our clients and to educate you about common IRS audit triggers. We are not only tax preparation and representation experts, but strive to become valued business partners. Tax Samaritan is committed to understanding our client’s unique needs; every tax situation is different and requires a personal approach in providing realistic and effective solutions.

If the IRS audit triggers were unavoidable and you’ve received an IRS audit notice, it’s smart to work with the Enrolled Agents at Tax Samaritan. Please click the button below to request a Tax Resolution Quote today to explore your options for professional support with your IRS audit and/or a free 30-minute consultation to discuss your situation further.

Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.

When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in effectively responding to IRS audit triggers, like Tax Samaritan.

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Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.

Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.

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