5 Common Reasons for an IRS Audit

After you file your taxes and get squared away with any payments, it’s normal to think that you’re home free. But what about an IRS audit? Even if you’ve paid what you owe, there are common mistakes with taxes that might flag some extra attention—especially if you’ve prepared your taxes on your own.

5 Reasons for Your IRS Audit

If you’re worried about getting an audit, consider the following problems. There are a few different scenarios where the IRS is more likely to move forward with an audit. Avoiding these issues ahead of time can keep you in the clear. Of course, if you do run into unexpected errors, you can always call on a great CPA team!

1. Is your income unusually high or low?

Typically, you’ll be less likely to be audited if your adjusted gross income falls between $25,000 and $200,00. Your chances for an audit will go up when your income shown is higher or lower than this range. Did your income have an unusual shift last year? Or has it stayed steady over the past several years? Major changes can make the IRS curious about your return—even if they happened for valid reasons.

2. Did you remember to report all of your income?

The IRS has an automated program to compare your W-2 and 1099 information with what you’ve reported on your tax return. If the numbers don’t line up, you’ll probably receive a notice from the IRS. Forgetting to report any one of your documents might mean you have additional payments due.

3. Do you own a business?

The rules for business deductions can be confusing, so it always helps to have a professional work with you to prepare your taxes. Mislabeling personal expenses as business expenses will cause problems. Businesses that primarily deal with cash transactions can also come with some audit risks. It’s always important to have good records for your expenses and income. Bookkeeping can help keep you on track. 

4. Could you have made a math error?

When you work through enough calculations, you’re bound to run into some mistakes. It’s not hard to imagine how the IRS can find millions of math errors in any given year. Credit equations can be especially challenging. You might be contacted for additional tax owed if you’ve miscalculated. This can lead to problems both for last year’s return, and for your tax documents down the road.

5. Have you claimed the Earned Income Tax Credit?

Understanding the eligibility requirements for certain tax credits isn’t always easy. Sometimes, tax payers mistakenly claim credits that don’t fully apply to them. If you’ve included the EITC on your return and it had a significant impact on what you owe, it’s possible the IRS will need to take a closer look.

You don’t have to manage an IRS audit alone. Our knowledgeable team at NSO and Company is here for you! If you have any questions about the next steps, feel free to give us a call at (317) 588-3131. Being chosen for an audit doesn’t always mean something is wrong. Of course, it can certainly help to have some experience on your side.