Facing an IRS audit is a daunting experience. The idea of having your financial records scrutinized by the most feared collection agency, the IRS, can shake anyone to their core. The cost in both time and money can seem never-ending.

Understanding the top reasons taxpayers get audited by the IRS can help you avoid common pitfalls and navigate the audit process more confidently.

In this article, we’ll shed light on these audit triggers, offering insights into what may prompt the IRS to take a closer look at your tax return. 

Additionally, we’ll cover how a tax relief professional like Diehl CPA can provide assistance should you ever find yourself facing an IRS audit.

1. Math Errors and Discrepancies

Mathematical errors or discrepancies on your tax return are a prime reason for IRS audits. Common mistakes include errors in addition, subtraction, or basic mathematical operations. While these errors may be unintentional, they can still trigger the IRS to take a second look.

2. Large Discrepancies Between Reported Income 

The IRS receives copies of the income you report through information returns like W-2s and 1099s. When these documents show significant disparities from the income you’ve reported on your tax return, it raises concerns. 

For example, if someone you did work for reports a different income figure on a 1099 than what you reported, it may trigger an audit. Accurate reporting and proper documentation are essential to avoid this issue.

3. High Deductions and Credits

Claiming excessive deductions or tax credits compared to your income level or industry norms can invite IRS scrutiny. While deductions and credits are valuable tools to reduce your tax liability, they must be justified and supported by appropriate documentation. 

For instance, inflating charitable contributions or business expenses can lead to audits. Taxpayers should exercise caution, ensuring their claims align with tax regulations and that they maintain comprehensive records.

4. Failure to Report Income

Failure to report income, whether intentional or accidental, is a significant audit trigger. This includes income from freelance work, rental properties, interest, dividends, or offshore accounts. Accurate and comprehensive income reporting is crucial to prevent tax audits and legal complications.

5. Self-Employment and Business Activities

Self-employed individuals and small business owners face higher audit risks due to the complexity of their tax returns. The IRS closely scrutinizes business deductions, income sources, and compliance with tax laws. 

Common audit triggers in this category include claiming excessive business expenses, misclassifying workers as independent contractors, or underreporting self-employment income. 

Taxpayers in these categories should maintain accurate records and seek professional guidance to ensure compliance.

6. Inconsistent Filing History

Frequent amendments or inconsistencies in your filing history may prompt IRS scrutiny. While it’s perfectly acceptable to amend a tax return to correct genuine errors or provide additional information, excessive amendments or inconsistencies can raise suspicion. 

Maintaining consistent and accurate filing practices helps reduce the likelihood of audits based on your filing history.

7. High-Income Individuals

High-income individuals often face increased audit risks due to the potential for larger tax liabilities. The IRS verifies that high earners accurately report their income, deductions, and credits. While high-income individuals have legitimate opportunities for deductions and credits, their returns undergo more thorough examination. 

Already Audited? Do This Next

What if you’re already in an audit? The first thing you need to do is call a firm like ours that specializes in complicated tax problems like this.

Should you ever face an IRS audit, remember that Diehl CPA is available to provide expert assistance, ensuring that you navigate the audit process with ease and confidence.

If you’re currently dealing with IRS problems and owe $10,000 or more in back taxes or are being audited, reach out to our tax resolution firm, and we’ll schedule a free and confidential consultation to explain your options thoroughly and help you permanently resolve your tax problem diehl.cpa/contact.