6 Common Reasons the IRS Will Audit You | FinanceBuzz

Filing taxes is an essential responsibility, but even small missteps can attract the IRS's attention. Understanding the key triggers for audits can save you from financial stress. Let's explore eight common reasons that lead to IRS audits while sharing tips to protect yourself.

Suspicious deductions

Excessive deductions or those disproportionate to your income can raise red flags. For instance, claiming large charitable donations without receipts might invite scrutiny. Always document your deductions with receipts and avoid exaggerating claims to stay compliant.

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Fluctuating income

Sudden increases or drops in income tend to draw IRS attention. Whether you receive cash payments or experience a dramatic earnings shift, keep thorough records of all sources of income to clarify discrepancies if questioned.

Hobby hauls

Misreporting income from hobbies as business earnings can lead to an audit. Evaluate whether your activity is a legitimate business or merely a pastime. When uncertain, seek professional tax advice to ensure accurate filing.

International holdings

Holding assets abroad that go unreported puts you at higher risk. The IRS monitors such accounts rigorously under FATCA (Foreign Account Tax Compliance Act). Transparency will spare you from steep penalties.

Too round numbers

Rounding off or estimating business expenses can appear suspicious. Always claim precise amounts backed by receipts. Mixing personal and business costs is another pitfall—maintain separate accounts for clarity.

Home office

A home office deduction is valid only for self-employed individuals using a dedicated workspace. Claiming this deduction when it's inapplicable can cause problems. Be sure to meet all requirements before claiming.

Avoiding audit triggers is a matter of careful preparation and honesty. Maintain detailed records, comply with tax requirements, and consult professionals if needed.

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Editor's Note: Portions of this story were drafted with assistance from generative AI tools. All final creative decisions, edits, and fact-checking were done by human writers and editors.