What triggers a tax audit? Several factors can come into play. For one, an audit is more likely if your tax return stands out from the crowd.
Large deductions attract attention, but the IRS is especially interested in write-offs that seem out of line with the rest of your return. For example, if you claim $30,000 of mortgage interest and report only $40,000 of income, you’ll probably raise some eyebrows at the IRS. But don’t let the possibility of an audit keep you from taking every legitimate deduction.
A red flag may go up if you claim a relatively large casualty loss, or if you make a large non-cash charitable contribution. To support these deductions, keep good records. In the appropriate case , consider documenting your deduction with a photograph, or obtain a written report from an expert appraiser and attach it to your income tax return.
Being in business can trigger an audit, especially if you’re a sole proprietor who files IRS “Schedule C.” Your return is more likely to stand out if you can claim large write-offs for business travel and entertainment, take a home office deduction, or show a large, overall loss.
You’ll almost certainly receive an IRS “matching” notice if you don’t properly report the income from your W-2 and 1099 forms. Be sure to include all such income, no matter how small, and make the description on your tax return as clear and accurate as possible.
One of the better defenses against audits is to have your tax return prepared by a well-qualified accountant, tax attorney, or taxpreparer. The headache you save may be your own.
