IRS Audit Red Flags: The Dirty Dozen


As recently reported by Kipplingers, here are twelve hot spots on your return that can raise the chances of scrutiny by the IRS.

  1. Making too much money
  2. Failing to report all taxable income
  3. Taking large charitable deductions
  4. Claiming the home office deduction
  5. Claiming rental losses
  6. Deducting business meals, travel and entertainment
  7. Claiming 100% business use of a vehicle
  8. Writing off a loss for a hobby activity
  9. Running a cash business
  10. Failing to report a foreign bank account
  11. Engaging in currency transactions
  12. Taking higher-than-average deductions

The IRS audits a very small percentage of all individual tax returns annually. The IRS does not have enough personnel and resources to examine each and every tax return filed during a year.

However, the chances of being audited or otherwise hearing from the IRS increase depending upon various factors, including your income level, whether you omitted income, the types of deductions or losses you claimed, the business in which you are engaged and whether you own foreign assets.  Math errors may draw IRS inquiry, but they will rarely lead to a full audit. Although there is no sure way to avoid an IRS audit, you should be aware of these red flags that could increase your chances of drawing unwanted attention from the IRS.