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5 Ways to Send a Red Flag to IRS Auditors


Only 1% of tax returns are audited by the IRS each year. If your return is clean to the best of your knowledge, there's a very slim chance you'll be audited.

But it's easy to make a mistake, and if your return sends up any of the red flags listed below, an IRS computer will pull it for review.

According to The Philadelphia Inquirer, here are five ways you're increasing your chances of an audit:

  • Not reporting all taxable income. The IRS has a copy of the same W-2 and 1099 that you received, so make sure you claim all of  your income on your return.
  • Claiming the homebuyer tax credit, even if you qualified for it. The IRS will be scrutizing the return of anyone claiming the home buyer tax credit even more closely. So attach a copy of your settlement statement, or documents showing prior ownership if you are a long-time homeowner, to your return.
  • Claiming charitable donations that are not proportionate to your income. The IRS estimates the average charitable donation for a person in each tax bracket. Any donation exceeding the estimate is more likely to be investigated. File an 8283 form for donations of $500 or more, keep all receipts, and have donated property appraised to avoid an audit.
  • Claiming a home office deduction. The IRS always investigates this deduction, because it is so often misused. Be ready to prove the use of this space, and make sure it's not being used for anything but work related activities.
  • Claiming 100% business use of your automobile. If you use this deduction, keep detailed milage logs and calendar entries for every trip. Don't claim expenses for maintenance, insurance, and other costs if you use the IRS standard milage rate to deduct business vehicle costs.


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