There are a number of things that you can do on your tax return that will end up serving as red flags to the IRS. Fortunately, there are a number of ways that you can avoid the IRS audit flags. The IRS actually uses a computer program to compare your return against the National Discriminate Information Function system average. The more that your point total deviates from the average, the more likely that it will serve as an audit red flag.
One of the largest IRS audit flags is when you claim high amounts of itemized tax deductions. The IRS establishes certain parameters for itemized deductions and when your claims exceed these parameters you are much more likely to be audited. By enlisting professional help you can avoid raising some of these red flags. But, if you are eligible for a deduction you should not hesitate in claiming it, just be certain that your taxes are filed correctly and that you have the proper documentation for each and every deduction that you make. A competent tax attorney can guide you through this process.
There are also many other red flags that draw the unwanted attention of the IRS when they are processing your tax return. If you have been audited in the past and the audit found that you owed back taxes, the government will be processing your returns much more carefully. One of the biggest IRS audit flags is when you claim tax shelter investment losses on your return. Also, be prepared for an audit if you own a business or work in a business that commonly receives cash in the regular course of business, such as doctors and lawyers. And if you have any types of expenses that are high in relation to your income be ready to defend your deductions and claims. There are a number of circumstances that may cause the IRS to audit you.
Finally, many times people become the subject of an audit because of a past disgruntled business partner or an ex-spouse. These people may contact the IRS and disclose some of your personal financial dealings in order to get retribution for some perceived offense. That’s why it is always important to file your taxes honestly and morally. You never know when someone that you trust may turn against you and use any information that you told them in confidence as a way to get revenge.