Red Flags for IRS Auditors

There is no way to know if the IRS will audit your return.  Unless you are creating a fraudulent return, you do not need to fret about getting an audit notice.  Make sure to keep all receipts to prove your expenses are legit.

Your chances of an audit will greatly increase if these factors apply to you:

  1. Making a significant amount of money

  2. Not reporting all taxable income – The IRS receives all W-2’s, 1099’s, etc from all sources of income and will match them up to your return.  If you are missing any income you be flagged

  3. Being Self Employed

    1. Having all expenses end in $0.  For example: Meals & Entertainment $500, Cell Phone $250, Business Licenses $100.  The IRS will assume you are estimated numbers and these numbers are not accurate

    2. 100% Business Use of Vehicle

    3. High meals and Entertainment Expenses

    4. Continuing to show a loss on your SCH C – Self Employed Income.  The IRS states you can only show a loss for 2 out of 5 years, otherwise you have a hobby and not a business.

  4. Having high itemized deductions – such as medical or charitable donations

  5. Claiming rental losses on your SCH E

  6. Not including your 1095-A Health Insurance Form

  7. Operating a Marijuana company

  8. Failing to report Gambling income

  9. Claiming Head of Household Status

  10. Claiming Foreign Earned Income Exclusion


Tax PlanningJaime LozoyaOC Tax Brake