Red Flags that Raise Your Chances of Being Audited

Red Flags that Raise Your Chances of Being Audited

Did you know that some people are more prone to being audited by the Internal Revenue Service (IRS)? There are certain "red flags" that make some individuals stand out, and not in a good way. Consider the following 5 red flags that the IRS looks for. If you fit one or more of the following categories, you may be at a higher risk of being audited.

1. High Income. If your income is higher than the state or national average, then this might seem suspicious to the IRS. More businesses are audited than individuals, but an individual with a high annual income can still look "fishy." Statistically, individuals who have an annual income of $200,000 or higher are at a higher risk of being audited than those with lower annual salaries.

2. Omitting Taxable Income. Whether you do this intentionally or accidentally, failing to report taxable income on your taxes is a huge red flag. The IRS will match what you send in with the information that they have on record, which includes all your employment forms. If they catch a discrepancy, they will likely audit you.

3. Write-Offs for Charitable Organizations. Many people charitably give throughout the year, which is an expense that can be written off. Not everyone who attempts to deduct charitable giving is red flagged, but those with unbalanced or disproportionate levels of charitable deductions might raise some questions.

4. Business-Related Write-Offs. A disproportionate amount of business-related write offs such as business meals, business travel etc. might raise some questions. If the IRS notices that you have an unusually high amount of business-related write offs then they may audit you.

5. Having a Home Office. Did you know that having a home office or working from home can be deducted? Claiming a home office deduction can be a smart move, and risk of audit should not keep you from doing so.