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IRS Audit Red Flags

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Tax season is here again... along with the question a lot of people ask: Why are some tax returns audited by the IRS while most are ignored?

The IRS audits only about one percent of all tax returns every year.  So the odds are definitely in your favor.  But there are some factors that increase your odds of being in that one percent.  

Kiplinger is out with it's "Dirty Dozen".  12 red flags that increase your chance of drawing some unwanted attention from the IRS.  They include:

  • Failure to report all taxable income.  A mismatch of your 1099s and W-2s with the income shown on your return sends up a red flag.
  • So does claiming large charitable deductions, especially if they're disproportionately large compared to your income.
  • Business meals, travel and entertainment are favorite deductions for self-employeds.  Alarm bells go off if they seem too large for the business.
  • Plus, IRS scrutiny if you claimed the home-buyer credit.  

But one of the biggest reasons that people get that dreaded letter from the IRS?  Math mistakes they make on their tax returns.  So double check before sending it in.

Click here for Kiplinger's "Dirty Dozen"