Most tax returns fly under the radar, but some situations raise red flags that could trigger an IRS audit. High-income earners, for instance, tend to attract more scrutiny as they’re seen as having greater potential for unpaid taxes. Similarly, clients claiming the Earned Income Tax Credit (EITC) must ensure they fully qualify, as this area is closely monitored for abuse.
Large deductions that don’t align with income levels, such as inflated charitable contributions, can also catch the IRS’s attention. For small business owners, separating personal and business expenses is critical, particularly for vehicle use or home office deductions, which are common audit triggers. Crypto transactions and unreported income, such as cash earnings from side gigs, require meticulous tracking and accurate reporting to avoid penalties.
Lifestyle inconsistencies, like lavish spending not supported by reported income, can prompt closer IRS scrutiny. Similarly, issues like failure to report large cash transactions or misreporting alimony under outdated rules can lead to audits. Round numbers on tax forms, repeated business losses, or improper documentation for early retirement withdrawals can also invite IRS interest. Proper planning, detailed records, and compliance with tax laws can help your clients navigate these pitfalls confidently and avoid unnecessary stress.
source: https://ultimatetax.com/blog/13-factors-increasing-your-clients-likelihood-of-an-irs-audit/
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