These red flags can trigger an IRS tax audit, experts say

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These red flags can trigger an IRS tax audit, experts say

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As millions of taxpayers file returns, many worry that certain claims could boost their chances of being

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. 

After an infusion of funding, the agency said it aimed to more than double the audit rate for the wealthiest taxpayers. But the IRS’ future priorities are unclear amid changing leadership and a Republican-controlled Congress and White House. 

Still, some areas can be “low-hanging fruit for the IRS,” said Mark Baran, managing director at financial services firm CBIZ’s national tax office.    

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Regardless of your income, you shouldn’t round numbers or estimate expenses on your return, Baran said.

“You’re really playing the audit lottery and increasing your risk,” he said.

Here are some other common IRS red flags for audit, according to some tax experts.

Underreported income

The IRS often finds missing income via so-called “information returns,” or

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For example, these could include

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 for wages, 

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 for contract or gig economy work or

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for investment earnings.

IRS software compares these tax forms to your return, and it can be “flagged for audit” when there’s a mismatch, explained Elizabeth Young, director of tax practice and ethics for the American Institute of Certified Public Accountants, or AICPA.   

High deductions compared to earnings

Another area for IRS scrutiny can be high tax breaks compared to your income, Baran said.

The agency has a program that compares your return to others in a similar tax bracket, he said. The software uses an algorithm to determine whether your deductions are higher than average.      

For example, if your

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Earned income tax credit

Another common target is the

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“There are people who claim it improperly for one reason or another,” said Syracuse University law professor Robert Nassau, director of the school’s low-income tax clinic. “It can be confusing,” with eligibility based on earnings, residency and family size.  

Higher earners are more likely to face an audit, but EITC claimants have a 

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 than the rest of U.S. filers, partly due to improper payments, according to the Bipartisan Policy Center.

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‘Substantiation’ can protect from audits

While there are red flags, IRS audits are still relatively rare.

Through fiscal year 2023, the IRS

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of individual returns filed for tax years 2013 through 2021, according to the latest IRS Data Book. 

When audits involve “mistakes or innocent omissions,” they are typically conducted via so-called “correspondence audits,” which happen by mail, Baran said.

More than 77% of fiscal year 2023 audits occurred via correspondence, the IRS reported. The remaining were face-to-face “field” audits.

Either way, filers with “substantiation really should not fear,” said Baran, noting the importance of receipts and other records to support claims on your return.

“The IRS knows when somebody is prepared and they will move on,” he said.  

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