I wrote a couple of posts on some common IRS audit red flags shortly after tax season ended and never finished the list. So here are a few more items that might cause the IRS to want to look at your tax returns a little more closely.
Yes and no. Great accountant answer, huh? The truth is that the Internal Revenue Service has some special red flags in place that help flag your tax return for an audit. Those super-secret red flags are revealed to no one. Apparently the IRS system takes your tax return data, runs its super-secret algorithm, and decides if your tax return is a high risk for problems.
So the usual way you get flagged for an audit is due to what you’ve reported on the face of your tax return. Home office deductions have long been dogged as items that increase your chances for an audit, and I tend to believe that’s true. Why would a home office be a red flag? It’s a much-abused deduction, and it can be closely tied to other questionable deductions like those from a multi-level marketing “business.”