Fear of IRS Audit

Red flags that could trigger an IRS audit

In 2019, the IRS only audited 0.4 percent of individual income tax returns. Despite that low percentage, many people ignore tax breaks because they live in fear of getting audited. That unfounded fear can leave money on the table. As always, knowledge is power. If you know the signs that might actually trigger the IRS, you won’t have to worry when it comes time to file. Here are some red flags that might trigger an audit.

  • You didn’t report all income. The IRS can easily check the income you’re reporting against the income reported by employers, banks and more. Make sure you have all of your W-2s and 1099s, especially if you’re a freelancer. Cover all bases so that you’re reporting every cent of your income.
  • Business expenses were high. You might get audited if your business expenses are much higher than similar businesses. You can combat this by keeping detailed records of every expense. Hold onto those receipts and documents for at least six years.
  • There were mistakes. Another trigger for the IRS is errors in your return. These mistakes range from simple things — like entering the wrong Social Security number — to rounding numbers up instead of using exact dollar amounts. This is a good reminder to file early so you don’t feel pressured and make careless errors.
  • You made a large donation. Keep track of all charitable donations, because they could trigger an audit. As US News reports, if you made a cash or noncash donation to a charity valued at $250 or more, you can only claim that deduction if you have the required documents from the charity. A good rule of thumb to avoid an audit? When in doubt, keep the documents.
  • Chris O'Shea

    Chris O'Shea