While most tax returns are accepted without issue, certain patterns dramatically increase the likelihood of an IRS audit. Knowing these audit triggers helps taxpayers and business owners file clean, defensible returns.
Top Audit Triggers
- High Income: Taxpayers earning over $500,000 face a significantly higher audit risk.
- Large Deductions: Especially if they’re disproportionate to your income (e.g., large charitable contributions or business losses).
- Schedule C Losses: Repeated losses on sole proprietorship returns may signal a hobby rather than a legitimate business.
- Mismatched Documents: Discrepancies between 1099s/W-2s and reported income often trigger automated IRS notices.
- Home Office Deduction: Still viable, but must be calculated precisely and used exclusively for business.
- Cryptocurrency Transactions: The IRS is actively monitoring digital asset trades and expects accurate disclosures on Form 8949 and Schedule D.
- Foreign Accounts: Offshore bank accounts and foreign income must be reported via FBAR (FinCEN Form 114) and Form 8938.
How to Avoid an Audit
- Double-check all math and data entry
- Maintain thorough documentation for all deductions and credits
- File on time and pay what you owe
- Work with a CPA who understands IRS enforcement trends
Worried about audit risk? We help individuals and businesses file accurate, audit-resistant returns. Contact us today.