{"id":19165,"date":"2024-02-28T13:58:20","date_gmt":"2024-02-28T18:58:20","guid":{"rendered":"https:\/\/blog.eztaxreturn.com\/?p=19165"},"modified":"2024-02-28T17:39:07","modified_gmt":"2024-02-28T22:39:07","slug":"6-red-flags-that-will-trigger-an-irs-audit","status":"publish","type":"post","link":"https:\/\/staging.eztaxreturn.com\/blog\/6-red-flags-that-will-trigger-an-irs-audit\/","title":{"rendered":"6 Red Flags That Will Trigger an IRS Audit"},"content":{"rendered":"\n

The information in this article is up to date for tax year 2023 (returns filed in 2024).<\/em><\/p>\n\n\n\n

Many people view the IRS<\/a> as this big powerful monster that can garnish your wages and seize your assets. The reality is that IRS audits<\/a> rarely happen. Out of the 162,037,000 tax returns<\/a> that were filed last year, less than 1% were audited. The best way to stay out of trouble is to learn the red flags.<\/p>\n\n\n\n

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1. Earning A Lot of Money<\/strong><\/h2>\n\n\n\n

Outside of people who report no adjusted gross income (AGI)<\/a>, nobody gets more attention from the IRS than high earners. In fact, the more money you make, the greater your chances of being audited.\u00a0\u00a0<\/p>\n\n\n\n

According to the 2022 IRS Data Book, individuals with an AGI between $1 and $25,000 were audited at a rate of 0.4 percent. The rate increases to 0.7 percent for those with an AGI between $5 million and $10 million. If you manage to rake in over $10 million the odds jump to 2.4 percent.<\/p>\n\n\n\n

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2. Failing to Report All Your Income<\/strong><\/h2>\n\n\n\n

When you receive copies of your W-2s<\/a>, 1099s and other tax documents<\/a>, the IRS does as well. So, don\u2019t try to be slick and omit information when you do your taxes. If what\u2019s reported on your return doesn\u2019t match IRS records, you better believe you\u2019ll be hearing from them. If you receive forms from your employer or client reporting the wrong income, contact the issuer to file a correction with the IRS.\u00a0<\/p>\n\n\n\n

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3. Making Math and Clerical Errors<\/strong><\/h2>\n\n\n\n

You\u2019re sadly mistaken if you think math and clerical errors are no big deal. In 2022, the IRS identified nearly 17 million math errors<\/a> on tax returns.\u00a0 As a result, almost 15.9 million taxpayers had to be notified. If you know math isn\u2019t your strong suit, use tax software like ezTaxReturn<\/a> to prepare your return. They make life easy by doing the calculations for you.<\/p>\n\n\n\n

If the IRS makes a math error adjustment, it will issue you a notice of the correction and the balance due. You can accept the changes and pay the adjusted amount or request abatement within 60 days of receiving the notice. If you\u2019re unable to pay the full amount, you can work with the IRS to set up a payment plan<\/a> so you avoid any late penalties<\/a>.\u00a0\u00a0<\/p>\n\n\n\n

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Get Started Now<\/a><\/div>\n<\/div>\n\n\n\n
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4. Claiming the Earned Income Tax Credit<\/strong><\/h2>\n\n\n\n

The EITC<\/a> was designed to help hardworking Americans who earn less than $63,398. But it is one of the most common places that people make errors. Be sure to double and triple-check your entries when claiming the credit because it\u2019s known for tripping people up.\u00a0\u00a0<\/p>\n\n\n\n

Returns claiming the credit also have a higher chance of being audited due to the high rate of false claims. In fact, the IRS estimates that 33% of EITC claims are paid in error.\u00a0<\/p>\n\n\n\n

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5. Taking the Home Office Deduction<\/strong><\/h2>\n\n\n\n

If you are self-employed and work from home, you may be able to deduct your home office space on your tax return. But the deduction has earned a reputation for triggering IRS audits because many people misunderstand and misuse it.   <\/p>\n\n\n\n

There\u2019s nothing wrong with claiming the home office deduction if you truly qualify, but make sure you\u2019re clear on the rules. The office room must be regularly and exclusively used for your business. It must also be your business’s primary location. If the space is sometimes used as your guest room or playroom for your children, then you cannot claim it on your return.<\/p>\n\n\n\n

Make sure you keep clear and accurate records of your business and office expenses in case you need to prove your eligibility to the IRS. To reduce the risk of additional math errors, you can use the simplified option for home deduction<\/a> to calculate your write-off. This allows you to deduct $5 for every square foot of your designated office space\u2014up to 300 square feet\u2014for a maximum deduction of $1,500.  <\/p>\n\n\n\n

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6. Receiving an Early Distribution From Your IRA<\/strong><\/h2>\n\n\n\n

When you don\u2019t have any savings, sometimes you have no choice but to tap into your IRA<\/a> when emergencies pop up. If you\u2019re younger than 59 \u00bd, you\u2019ll pay a 10% early withdrawal penalty<\/a> unless you qualify for an exception.\u00a0\u00a0<\/p>\n\n\n\n

For instance, you can avoid the penalty if the money is used to pay for college or if you took up to $10,000 to buy your first home. The IRS has a whole list of exceptions<\/a> for you to choose from. Just make sure it\u2019s legit otherwise, you may find yourself sitting in an IRS audit.<\/p>\n\n\n\n

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Minimize Your Audit Risk by Filing With ezTaxReturn<\/strong><\/h2>\n\n\n\n

Filing electronically through a trusted tax prep solution like ezTaxReturn is faster, safer, and more accurate than filing taxes on your own. Plus, ezTaxReturn offers free tax filing for simple returns. <\/p>\n\n\n\n

Still nervous about an IRS audit? Protect yourself even further with ezTaxReturn\u2019s Audit Defense Protection<\/a>. If you are audited or receive an IRS notice, ezTaxReturn will help you each step of the way, including
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