That tax season, the IRS said is adding staff and technology to “turn around historically low audit rates” on high-income taxpayers. Filing season may already be a stressful moment for many people, between having to navigate countless forms It is compiling all the correct information. The looming threat of an audit can add even more stress to tax season.

This story is part Taxes 2024CNET's coverage of the best tax software, tax tips and everything else you need to file your return and track your refund.

According to the IRSAn audit is simply a review of your accounts “to ensure that information is reported correctly in accordance with tax laws and to verify that the tax amount reported is correct.”

Regardless of whether or not you are among the “high-income, high-wealth individuals” the IRS is targeting this year, your chances of being audited are still very slim: Of the roughly 165 million returns the IRS received in 2022, approximately 626,204, or less than 0.4%, were audited.

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A review of a federal income tax return can be triggered randomly, but certain behaviors are more likely to be flagged than others. According to IRS, audits are determined by a “statistical formula” that compares your returns to those of other taxpayers. Errors can alert

Here are some common mistakes that generate more scrutiny from the IRS and what you can do to avoid them.

For more tax tips, Check out our tax filing cheat sheet It is the best tax software for 2024.

1. Your return is incomplete

“There is no single thing that automatically triggers an audit, but inconsistent documentation is the most common reason you receive a letter from the IRS,” Jo Willetts, director of tax resources at Jackson Hewitthe told CNET.

It can be as simple as missing a form, Willetts said, “and it often happens to people who rush in at the last minute.”

The federal government offers a variety of credits, such as the child tax creditwhich allows parents to claim up to $2,000 per qualifying child.

You have to show that you legitimately qualify for these benefits, Willetts said.

“If last year you didn't claim any child tax credits and this year you claimed three children and they're not babies, that will trigger a letter from the IRS,” she said.

This doesn't always mean you made a mistake or are trying to trick the government. You may have had a child in May 2023 and the IRS is working on your 2022 return.

2. You messed up the math or other information

While simple math errors generally won't trigger a full examination by the IRS, they will attract extra scrutiny and delay the completion of your return. The same can happen with mistyping your Social Security number, transposing your address numbers, and other stupid mistakes.

Filing Electronically reduces these gaps by pulling lots of information from previous returns and allowing you to upload your W-2s or 1099s directly into the system.

Using a professional tax preparer is also a good bulwark against mistakes and miscalculations.

3. You are self-employed and do not report deductions accurately

“If you are self-employed and have legitimate business expenses, you should feel empowered to take them on,” said TurboTax tax expert Lisa Greene-Lewis. “Just make sure you have receipts and documentation to prove it.”

If you claim the home office deduction, it must be a space used “exclusively and regularly for your trade or business” – not your dining room table.

If you claim transportation expenses, you will need to document the mileage used for work. If you deduct 100% of your personal vehicle as a business expense, that will raise a flag, Greene-Lewis said.

Being diligent is especially true when deducting business meals. In 2021 and 2022, business meals could be 100% deductible, but now that limit has dropped back to 50%.

“But you have to document who you’re with, what the purpose of the meeting was, the date of the meal and so on,” Greene-Lewis said. “And of course, keep your receipts.”

4. You claim too many business expenses or losses

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The IRS computer system is looking for deductions that are outside the norm for people in your profession.

Angela Lang/CNET

You are required to complete a Form C if you have income from a business. But this complicates your return and can increase the likelihood that you will be contacted by the IRS.

Greene-Lewis encourages taxpayers to claim all deductions to which they are legitimately entitled, but to be extremely diligent in justifying those deductions with details and supporting documentation.

In general, the IRS algorithm is looking for deductions that are outside the norm for people in your profession: if you are a patent attorney but your travel expenses are three times what other patent attorneys claim, this could lead to a more detailed inspection.

If you have suffered a loss in your business for several years in a row, the IRS may want to ensure that your business is honest.

According to Thomas Scott, tax partner at CPA firm AprioSmall business owners who keep sloppy records often make frivolous deductions.

“When a business owner offsets expenses and deductions, they tend to stand out,” Scott told CNET. “As part of an audit, the IRS will require support and proof of deductions and, if not provided, those deductions will be voided.”

On a similar note, Scott added, “companies trying to obtain incentives and credits for which they do not qualify may raise a red flag.”

5. Your charitable deductions are outsized

If you itemize your deductions, you can claim cash donations to recognized charities – as well as the value of a donated car, clothes and other goods. The IRS warns you if these donations seem out of line with your income.

The agency's computer program, the Discriminant Information Function system, continually checks returns for such anomalies.

“If you've claimed a charitable deduction that's equal to half your income, that's going to get their attention,” Greene-Lewis told CNET.

The IRS imposes limits on how much of your adjusted gross income can be deducted as charitable contributions. There are some forms of donations that can exceed this limit but doing so will likely attract scrutiny, so you'd better have all your paperwork in order.

6. You have undeclared income

Here's the problem: Employers are required to file a W-2 with the IRS that reflects their earnings, or 1099s in the case of freelancers and contractors earning more than $600.

The IRS automatically checks whether your reported income matches what your boss submitted. It is also notified about interest or earnings from savings accounts, investments and stock trades, as well as large winnings from gambling, inheritances and almost any other type of income.

If you fail to report capital gains on cryptocurrency trades, it could trigger an audit.

Even if you work in a cash business – say, as a waiter or babysitter – unclaimed income can catch up to you.

“If someone is bringing their child to you to look after, they are probably claiming your service on their taxes. So you need to make sure everything is aligned,” says Willetts. “Even a small business like a house painter will require you to be bonded. This will eventually cross the IRS desk.”

Government agencies talk to each other, she added. If you report $20,000 of income on your tax return, but when you apply for a Federal Housing Administration-backed home loan, you deposit $80,000, this will raise a flag.

According to Aprio's Thomas Scott, small business owners who don't keep good records also tend to underreport, a major audit risk.

“Because the business owner hasn't tracked their income throughout the year, when it comes time to file their taxes, they tend to make estimates,” says Scott. “The problem with this approach arises because most of the income earned was reported to the IRS on Form 1099. The IRS may equate the income reported on the homeowner's return to the income reported on Form 1099.”

The IRS accepts tips from concerned citizens, so a disgruntled employee or offended co-worker can be very happy to report you for tax fraudespecially because the agency 2006 whistleblower program incentives increased to potentially between 15% and 30% of the income the IRS collects.



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