The IRS tax return figures of 152 million in 2017 are expected to be broken in 2018.  IRS audits less than one percent of its tax returns. This makes it unlikely that your tax returns might get audited. Nevertheless, you cannot rule out the chance that it would not happen.  The good news is that there are several factors or red flags which increase chances of your tax return getting audited. If you can avoid these triggers, you can almost be certain of avoiding an audit.
  • Math errors
All income tax return are fed into the IRS computer ultimately. While any math’s error might escape a human being’s attention; it cannot brush past the computer. It is bound to get the limelight. This is precisely why you must double check your return sheet and possibly run it through a tax program to verify that there is no math error.
  • Failing to report all your income
Another common mistake to attract a tax audit is the discrepancy in your tax returns to the W-2 form or 1099 form in which all your past and current employers report the payment given to you.  Thus, it is essential for you to verify it and either correct your tax returns or have the employer rectify the form sent by him. This will help you avoid an audit.
  • Earning a high income
Your income level has a significant impact on your odds of being audited. A higher income means you are more likely to underreport your income and avoid the higher tax charges. You are also more prone to making errors. Simultaneously, the IRS also gets a higher pay-off for auditing these higher-income returns. All records show that most of the less than 1% audits are of higher income groups. Thus, if you fall into this bracket, it is critical that you not only report all income but also keep the documentation to prove it if need be. Additionally, be careful about choosing the correct tax form and filling up every relevant field.
  • Out-of-proportion income
The IRS is suitably updated about the median average income of any job. If your income figures vary markedly from your other colleagues of the same industry; you are more likely to come under the radar. This is a very common cause triggering an IRS tax audit. The best way out of it is to report your honest income every time. Otherwise, you might feature in the audit list every year.
  • Breaking the rules of a foreign bank account
Of late, the IRS has tightened the scrutiny on Americans with foreign bank accounts and assets. The Foreign Account Tax Compliance Act requires you to disclose all your offshore accounts and assets voluntarily. Any discrepancy here is almost sure to invite an audit. Compliance will probably invite an audit by nature and noncompliance can lead to stiff penalties and significant legal liabilities.
  • Blurring the lines on business expenses
The IRS is well versed with average business deductions as well. They have occupational codes to measure typical business expenditure of any profession. Deductions on home office, business meals, travel etc. should not exceed more than 20% of this average expenditure. If it exceeds, you are likely to invite an audit. You should be well versed as to what qualifies as a deduction and fulfill its entire obligation to the tee. It is imperative that you keep detailed records of all business expenditures including date, location, business purpose etc.
Bottom Line
Audits are an integral part of the tax collection process. However, it can be a frightening and intimidating experience if you are the receiving end. Honesty and proper documentation of your deductions, income and donations is the way out. Availing the services of an experienced tax attorney can also significantly reduce your chances of being audited. They have expertise and experience to make your tax filing and entire process be a smooth walk.