What Can Trigger a Tax Audit by the IRS?
Though the IRS conducts tax audits somewhat randomly, there are many things the IRS considers red flags that can increase the chances of a tax audit. Even though you cannot 100% avoid an audit, you can attain peace of mind by knowing what may trigger a review of your tax return.
(1) Any change in filing status or major changes in income. If you previously filed as a non-resident alien, and now you are a resident alien or Permanent Resident, you may be subject to a tax audit. If your income suddenly increases or decreases, the IRS may look at your return more closely. While these changes are perfectly normal, the computer that selects tax payers for random audits considers them red flags. If your tax situation changes dramatically from one year to the next, do not be alarmed if you are selected for review.
(2) Certain jobs. People whose wages come from tips, cash, or the self-employed are much more likely to be audited. This is because the IRS knows how easy it is to under-report income if you have a non-traditional or service job. Make sure to report all of your income as accurately as possible.
(3) Arithmetic errors. All tax returns are reviewed either manually or by computer. A simple mistake will be fixed by the person who processes your forms, but the price may be increased chance of a tax audit.
(4) Filing your taxes too early. You can file your taxes at any point before April 15, but since fewer people file that early, it makes your tax return stand out more. Filing closer to the deadline (when most people file) means that your return is more "average" and therefore less of a target for an audit.
(5) Excessive deductions, especially deductions without proof. Most tax payers know how easy it is to fudge deduction numbers, and the IRS know too. Those for gas and food are more likely to trigger an audit. A good rule to follow is if you can't prove it, don't deduct it.
(6) Your tax preparer is on a blacklist. The IRS maintains a list of tax preparers who are known to have committed fraud in the past. Watch out for tax preparers who "guarantee" refunds or "no-audit" returns. Nobody can guarantee such things, and if one of these guys does your taxes, you're even more likely to get audited!
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