IRS audits are more likely to occur if you have these red flags on your return.
If you are preparing to file your tax return, you may wonder if the IRS will audit it. Most people can breathe easily because the vast majority of individual returns escape the audit machine. Recent IRS audits of personal tax returns have been significantly lower than 1%. Taxpayers selected for audits typically never meet with IRS agents in person because most audits are handled solely by mail. The increase in audits will also take time to occur. Hiring experienced examiners and training them to audit complicated tax returns will take time for the IRS. With the Inflation Reduction Act passed last year, the IRS gets $80 billion in additional funds over ten years, with a large chunk of that money for increased enforcement activities. The IRS’s $80 billion windfall will have a minor impact on taxpayers for at least a few years.
The bad news is that your chances of winning the unenviable audit lottery escalate (sometimes significantly). Tax cheats should not take advantage of this opportunity. Depending on several factors, including how much income you report, how complex your return is, what deductions and other tax breaks you claim, if you run a business, or if you own foreign property. Tax authorities might also look closely at math errors, but they usually only result in partial investigations. Additionally, refundable tax credits, such as the earned income tax credit or the refundable child tax credit, can have errors. Ultimately, you cannot predict an IRS audit, but these 19 red flags could increase your chances of being audited.