IRS Audit Triggers to Avoid

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The Biggest IRS Audit Triggers — How Can You Avoid Them?

Audits are among the most dreaded interactions with the IRS. Unfortunately, these can be triggered by all kinds of concerns. Some issues are easier to avoid than others, but all those highlighted below warrant your undivided attention:

Typos and Math Errors

The most common IRS audit triggers are often the easiest to avoid. Seemingly small errors can make a huge difference when determining your refund or how much you need to pay in. Check and double-check your return before you submit it — and consider calling on a professional to do the same.

Undeclared Income

Does the income listed on your tax return truly reflect all that you earned during the previous year? If not, an audit is likely.

Employers file W-2s every year, with 1099 forms taking their place for independent contractors. Either way, the IRS will know that something is up if it receives one of these forms but does not observe the corresponding income in your tax return.

Excessive Business Expenses

It’s tempting for self-employed professionals to write off everything imaginable. This strategy can certainly lead to savings, but it also increases audit risk. The line between expenses deemed “allowable” and those that trigger audits can be surprisingly thin.

To qualify, expenses must be both ordinary and necessary in the taxpayer’s line of business. Determined to reduce audit risk? Save all receipts and think carefully about whether specific expenses are actually necessary for business.

Digital Currency Transactions

The failure to disclose crypto activity could increase your odds of getting audited. The IRS has made the importance of crypto abundantly clear by mentioning it on the very first page of today’s tax returns.

Are you worried about triggering an IRS audit? Or have you already been targeted? Either way, you can benefit from working with our team at the Highland Tax Group. We offer exceptional audit representation services — reach out today to get started.