The Red Flags That Can Trigger An IRS Audit On Your Tax Returns

As nice as it is to get your tax refunds safely, it can be a bit of a nerve-wracking process.

Every year, Americans celebrate their tax refunds coming in after tax season. Unfortunately, it’s the same time of year to fear an audit by the IRS as well. Even when you try your best to make sure everything is in order, mistakes do happen. To make it simpler, you can look for the red flags in your tax returns, just as the IRS will do when they’re going through your papers.

There are certain predictable triggers that would convince an IRS employee to call for an audit. The first big red flag is not reporting all of your income. Many people have secondary sources of income from second jobs, hobbies, freelance businesses, etc. To you, it might not look like a big deal, but for the IRS, it really is. It’s even codified into law that you must report your income from illicit activities such as drug trafficking into your tax forms. This might seem silly, but it’s no laughing matter for the IRS; they really do mean it when they ask for ALL income.

Another common issue that small businesses go through is overstating business expenses. Of course, simply overstating your business expenses can be a sly way to save some money on taxes. But if you’re too obvious, or something looks fishy, IRS employees are trained on how to spot discrepancies in your tax forms. If you accidentally overestimate your business expenses by a small amount, of course you will most likely be fine. If you are so blatant as to cite obviously personal expenses, or to provide wildly inaccurate information, you should expect an audit.

Lastly, if you are a parent/guardian, and you don’t file your taxes with the other parent/guardian of your child, only one of you can claim the child as a dependent. If you are happily married, make sure to keep this in mind so as to not unnecessarily waste time with the IRS.

All things considered, most people are usually fine. In 2017 the IRS only audited 1% of those earning less than $200,000 per year, and 4% of those earning more.

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5 years ago
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