What are the common red flags that can trigger an income tax audit?

Common Red Flags That Can Trigger an Income Tax Audit

When filing your income tax return, it's important to be aware of certain red flags that could potentially trigger an audit by the IRS. Here are some common red flags to watch out for:

• Significant Changes in Income: Sudden and unexplained increases or decreases in income can raise suspicion and trigger an audit.
• High Income: Individuals with high incomes are more likely to be audited as they may be subject to greater scrutiny.
• Self-Employment: Self-employed individuals are at a higher risk of audit due to the potential for underreporting income or claiming excessive deductions.
• Large Deductions: Claiming unusually large deductions, especially in comparison to your income level, can be a red flag for the IRS.
• Home Office Deductions: Deducting expenses for a home office can be a common audit trigger if the expenses seem disproportionate to the income earned.
• Failure to Report Income: Omitting sources of income, such as freelance earnings or investment gains, can lead to an audit if discovered by the IRS.

It's essential to ensure that your tax returns are accurate and thorough to minimize the risk of triggering an audit. Consulting with a tax professional can also help you navigate potential red flags and ensure compliance with tax laws.