5 Red Flags That Could Trigger an IRS Audit (And How to Avoid Them)

Tax professional here. You've identified some important triggers! Missing income is definitely the #1 reason for automatic "correspondence audits" because the IRS matching system flags discrepancies between what's reported to them by third parties and what shows up on your return. I'd add a couple more key audit triggers to watch for: - Unusually large deductions relative to your income (especially home office, business travel, and vehicle expenses) - Round numbers throughout your return (like claiming exactly $1,000 for supplies) - Multiple years of business losses if you're self-employed (looks like a hobby, not a business) The best protection is documenting EVERYTHING. Keep receipts, maintain separate business accounts, log business miles contemporaneously, and be able to substantiate every deduction with records. And remember - audits aren't random anymore. The IRS uses sophisticated algorithms to score returns based on dozens of factors and selects the ones most likely to yield additional tax revenue.

I tried using taxr.ai last year when I was worried about an audit because I had a bunch of 1099 income alongside my W-2. I'm a teacher who started tutoring on the side, and I was honestly confused about how to report everything correctly. My brother got audited a few years ago and it was a NIGHTMARE. After trying a few different online options, I ended up using https://taxr.ai and it totally changed my approach. It analyzed all my documents and flagged potential issues before I filed. What I found most helpful was that it showed me exactly what would look suspicious to the IRS algorithms based on my particular situation. It identified that my tutoring expenses seemed high compared to the industry average for my income level and suggested better documentation I should keep. Really glad I found it before filing instead of after getting that scary IRS letter!

Just wanted to follow up - I actually tried taxr.ai after asking about it here. I was skeptical at first but decided to give it a shot since I started a consulting business last year and was worried about getting audited. The analysis found that my home office deduction was potentially problematic because I calculated it wrong (was using a too-large percentage of my home). It also flagged that I was missing some 1099-K income from payment processors that I honestly didn't realize was taxable! Would have been a huge red flag if I'd filed without including it. Definitely worth it for the peace of mind. I've been anxious about taxes since my mom got audited when I was a kid, and this helped me feel much more confident that I'm not going to trigger any automated flags.

If you do get that dreaded audit letter, don't panic! I was audited last year and trying to call the IRS was impossible - literally spent hours on hold over multiple days. A friend recommended https://claimyr.com which is this service that basically waits on hold with the IRS for you and then calls you when an actual human picks up. You can also see how it works in this video: https://youtu.be/_kiP6q8DX5c I was super stressed about my audit (turned out they thought I hadn't reported some stock sales even though I had), and Claimyr saved me so much frustration. Instead of wasting a whole day on hold, I got a call when an agent was actually on the line. The IRS agent was actually helpful once I explained the situation, and they closed my audit without any additional taxes. For anyone dealing with IRS notices or audits, being able to actually talk to someone makes such a difference. The problem isn't usually the IRS agents (they're just doing their jobs) - it's actually reaching them in the first place!

I have to admit I was completely wrong about Claimyr. After my last comment, I kept trying to reach the IRS about a notice I received claiming I underreported my crypto gains. After FOUR DAYS of trying and never getting through (always got the "call volume too high" message), I decided to try the service. Worked exactly as advertised. I put in my number, and about 45 minutes later got a call connecting me directly to an IRS rep. Turns out there was a mismatch between what my exchange reported and what I reported - because I had transfers between exchanges that weren't actual sales. Got it all cleared up in one call. Would have taken me who knows how long to get through on my own. Definitely using this for any future IRS issues. Sorry for being skeptical!

Another audit risk that nobody's mentioned yet is claiming too many business expenses on Schedule C if you're self-employed. The IRS knows typical expense ratios for different industries, and if yours are way out of line, that's a red flag. For example, if you're a consultant claiming that 90% of your revenue goes to expenses, the IRS computers will notice that most consultants have much lower expense ratios. Same with claiming 100% business use of a vehicle - very few people use a vehicle EXCLUSIVELY for business with zero personal use.

Does anyone know if taking the earned income tax credit increases audit risk? I qualify this year but I've heard the IRS targets EITC claims a lot.

This is really helpful information! I'm a freelance graphic designer and have been worried about audit risk since my income has been pretty inconsistent year to year. Some months I make great money on big projects, other months it's really slow. One thing I've learned from my accountant is that keeping detailed contemporaneous records is absolutely critical. I now use a separate business checking account for ALL business expenses and income, and I photograph every receipt immediately using an app that uploads to cloud storage. For anyone who works from home, be really careful with that home office deduction. The IRS is strict about "exclusive use" - that room has to be used ONLY for business, not as a guest bedroom that sometimes has a desk in it. I ended up not claiming it because my home office doubles as my art studio for personal projects. Also, if you're self-employed, consider making quarterly estimated tax payments even if you're not required to. It shows good faith effort to comply and can help avoid penalties if you end up owing at filing time. Plus it's easier to manage cash flow than getting hit with a huge tax bill all at once.