Tax Audit Red Flags

by Michael W. Blitstein, CPA
The IRS audits only slightly more than 1% of all individual tax returns annually. So why do they pick some returns to investigate and ignore others?  Although there’s no sure way to avoid an IRS audit, you should be aware of the following red flags that could increase your chances of drawing unwanted attention from the IRS.

You Have Foreign Assets…

Stashing money overseas? Then you’re probably well aware that the IRS has been ramping up its efforts to rein in offshore accounts.  Launched in 2009, the agency’s voluntary disclosure program has already raked in more than $5 billion in back taxes, interest and penalties for illegally hiding assets in offshore accounts.

Taxpayers are asked to check a box on Schedule B if they have an ownership interest in foreign accounts. If they then fail to provide information about those assets, it will undoubtedly trigger an audit.

Indicating on your return that you do business in foreign countries or take many trips abroad for work could also raise eyebrows if no foreign assets are reported.

Your Return Has Too Many Zeroes…

While rounding numbers on your tax return to the nearest dollar is okay, rounding to the nearest thousand is not – especially when itemizing deductions like business expenses, unreimbursed employee expenses and job hunting costs.  If you submit figures like $5,000 in auto costs, $2,000 in gas mileage and $4,000 in lodging, it may look like you pulled those numbers out of thin air or inflated them by rounding – since it’s unlikely that every single expense was a perfect multiple of $1,000.

You Have a Home Office…

Just because you do some work on your couch while watching TV doesn’t mean it counts as a home office.

After years of watching people abuse the home office deduction, the IRS is on the look out. In order to avoid being scrutinized, make sure you only claim reasonable expenses – and only those that directly apply to the part of the home used as an office.  Remember, the credit can only be claimed if the home office is your primary place of business and is used exclusively for work. People get into trouble when the IRS suspects they are mixing personal costs with their business costs.

You Forgot Some Income…

For people who earn money from various places, remembering to report every single cent can be difficult. But ‘I forgot’ isn’t a good enough excuse for the IRS.  For any miscellaneous income over $600 you received throughout the year, the company you worked for should send you a Form 1099. If you don’t receive it for some reason – it was mistakenly sent to a previous address, for instance – you can be sure that the IRS will still get it.  You can either request the missing form from the employer or simply report the income without the form. This is why it helps to track your income throughout the year.

Of course, some people earn money that may not get reported on.  Even if the IRS doesn’t know about it, you must report this income as well or you risk the agency finding out.

You Exaggerate Donations…

Even good deeds can spark suspicion at the IRS.  If you report extremely high charitable contributions – especially relative to your income – make sure you have the proof to back it up.  Receipts for cash donations of more than $250 are required in the event the IRS comes knocking.  Donating items gets a little trickier, because it’s common for people to think the items are worth a lot more than someone will actually pay for them. So it’s important to be reasonable with your valuations.

You Own a Money Losing Business…

If you own a business that is reporting losses year after year, the IRS may grow suspicious that it’s actually a hobby.  There’s a rule-of-thumb saying you must have a profit in two [out] of five years – if you don’t have a profit they’re going to look at it as a hobby.  To fend off the IRS, make sure to keep diligent financial records and do little things like have business cards and company letterhead.

You Have a Shady Tax Preparer...

If your tax preparer tries to convince you to claim deductions that sound too good to be true or to report income that doesn’t line up with what you would have reported, watch out.  You want a preparer that will get you the best refund possible – but not if it means breaking the law.

CJBS, LLC is a Chicago based firm that assists its clients with a wide range of accounting and financial issues, protecting and expanding the value of mid-size companies. E-mail me at if you have any questions about this posting or if I may be of assistance in any way.

76 thoughts on “Tax Audit Red Flags

  1. Pingback: Vanessa Smith

  2. Pingback: dofollow edu backlinks wikipedia

  3. Pingback: wiki donate gym deals exercise and physical fitness gyms fitness what is weight loss surgery

  4. Pingback: drums companies

  5. Pingback: extrait casier judiciaire

  6. Pingback: buy backlinks

  7. Pingback: budowa

  8. Pingback: tier2

  9. Pingback: tier2 junk

  10. Pingback: lunken airport flights

  11. Pingback: reserver hotel pas cher

  12. Pingback: Monett MO

  13. Pingback: Sportsnews

  14. Pingback: fotomaton para bodas

  15. Pingback: private equity

  16. Pingback: news

  17. Pingback: ankara eskort

  18. Pingback: unique gifts, gadgets to buy, gift for men

  19. Pingback: ankara eskort

  20. Pingback: Real Letrozol

  21. Pingback: eskort ankara

  22. Pingback: orospu ankara

  23. Pingback: Source

  24. Pingback: ankara escort

  25. Pingback: Carlton

  26. Pingback: ankara escort

  27. Pingback: legal steroid store

  28. Pingback: seks izle

  29. Pingback: seks izle

  30. Pingback: gta 5 money hack

  31. Pingback: orospu cocuguyum

  32. Pingback: orospu cocuguyum

  33. Pingback: orospunun dogurdugu

  34. Pingback: Malaysian Business Contacts

  35. Pingback: free credit scores all three bureaus

  36. Pingback: legal steroids that work

  37. Pingback: view it

  38. Pingback: cocuk sex escort

  39. Pingback: Green Mountain Printable Coupons

  40. Pingback: runescape darkscape bot farm

  41. Pingback: legal steroids for sale

  42. Pingback: Leo Kanell

  43. Pingback: webinar jeo review

  44. Pingback: Free hosting

  45. Pingback: free hacks 07scape

  46. Pingback: life insurance lawyer attorney

  47. Pingback: pace sem

  48. Pingback: How important is it to get the right size of heating and cooling equipment?

  49. Pingback: Buy amoxicillin

  50. Pingback: his comment is here

  51. Pingback: new

  52. Pingback: anabolics steroids

  53. Pingback: steroids for sale

  54. Pingback: comprar anabolicos

  55. Pingback: steroids buy

  56. Pingback: Anadrol

  57. Pingback: here

  58. Pingback: buy injectable steroids

  59. Pingback:

  60. Pingback: enanthate 250

  61. Pingback: read

  62. Pingback: best hgh supplements for athletes

  63. Pingback: info here

  64. Pingback: anadrol steroid

  65. Pingback: GreekShoppingBlog

  66. Pingback: low testosterone treatment

  67. Pingback: testo non 10 540

  68. Pingback: deca durabolin price

  69. Pingback: 5a-hydroxy laxogenin

  70. Pingback: tren prop mast

  71. Pingback: estanozolol inyectable

  72. Pingback: pt 141 oral

  73. Pingback: trenbolone cycle

  74. Pingback: info

  75. Pingback: steroids porn story

  76. Pingback: Piano For All Reviews

Leave a Reply