Tax season is a stressful time for many, but certain actions can significantly increase your chances of an audit. According to Gene Bott, a CPA and founder at Tax Hive, the IRS uses sophisticated matching systems to detect discrepancies, and common errors can quickly raise suspicion. Here’s a breakdown of the tax moves most likely to trigger extra scrutiny, along with advice on how to avoid them.
Income Discrepancies: The IRS Always Knows
The IRS cross-references your reported income with forms filed by your employers and financial institutions – W-2s, 1099s, and brokerage statements. Any mismatch between what you declare and what payers report is a major red flag. The IRS is already aware of most of your earnings, making underreporting nearly impossible to hide.
To avoid this, accountants recommend creating a comprehensive income checklist before filing. Ensure every W-2, 1099, and other relevant forms are accounted for. Importantly, not receiving a form from a payer does not mean the IRS wasn’t informed of your income.
Unrealistic Deductions: Keep Your Claims Consistent
Claiming deductions that are disproportionate to your profession or business model can trigger an audit. For example, a remote IT worker claiming thousands in hotel and airfare expenses will likely face questioning. The IRS expects deductions to align with the nature of your work.
Bott advises claiming all legitimate deductions, but always retaining detailed receipts as proof. This is especially critical if your business consistently reports losses; the IRS will scrutinize such claims more closely.
Round Numbers: Precision Matters
Rounding figures too neatly can also raise suspicion. The IRS knows that most real-world expenses don’t fall into exact increments like $100 or $1,000. Too many rounded numbers suggest estimation rather than accurate record-keeping.
To avoid this, include exact amounts down to the penny. Numbers should appear documented and precise, not estimated. This detail shows diligence and reduces the likelihood of an audit.
The IRS’s matching systems are highly effective, so meticulous reporting is the best defense. Failing to account for even small discrepancies can lead to unwanted scrutiny.
