Avoid an audit by knowing these 6 red flags
If history is any indicator, fewer than 1% of Americans will be audited by the Internal Revenue Service (IRS) in the coming year. Of that small amount, some of the audits are totally random. But many are triggered by actions taxpayers themselves have taken.
- Overvaluing home office expenses and donated goods are red flags to auditors.
- Simple math mistakes and failing to sign your tax return can also trigger audits.
- The odds of an audit increase with six-figure incomes, but under-reporting your earnings is ill-advised.
- Small business owners and limited partnership participants are at greater risk of being audited.