Most Suspicious IRS Audit Triggers

According to Accounting Today, the Minnesota Society of CPAs has compiled a list of red flags that could trigger an audit from the IRS if they apply to your clients' tax returns.

1. Misreporting Your Income
Always make sure your income on your Form W-2 and Form 1099 matches the reported income on your return.

2. Unusually High Charitable Deductions
You may raise some eyebrows if your charitable donations are well above average for your income range.

3. Unusually Low Salaries
The IRS takes a close look at S corporation compensation practices, particularly if the salary paid to a principal owner looks suspiciously low.

4. Your Social Security Number Is Wrong
Make sure you clearly write or carefully type your Social Security number to avoid added scrutiny over your hand-filed return, or the rejection of your e-filed return.

5. Claiming Losses from “Hobby” Activities
Certain types of businesses showing losses, such as horse racing or horse breeding, will often generate increased attention.

6. Claiming a Different Amount for Your Alimony Deduction or Alimony Income than Your Ex-spouse Claimed for the Corresponding Item This is easy pickings. You must report the Social Security number of your ex-spouse when you report your alimony deduction.

7. A Large Amount for Meals and Entertainment Expenses
Sizable meals and entertainment expenses for your type of business are common targets.