Top 5 Reasons for getting an IRS Audit in 2010!
Here are some of the top 5 reasons the IRS would raise an Audit Red Flag for an individual income tax return.
1. Failing to Report all income.
If you file a return but fail to report report all income received, this action would raise a audit red flag with the IRS! The IRS requires that taxpayers report all of your interest, dividends, and miscellaneous income on their Individual Income Tax Return.
2. Reporting Consistently very Low Income.
Thus, reporting consistently very low income when others in the same profession are generally reporting substantial higher income will certainly raise a audit red flag with the IRS.
3. Consistently using round numbers on all items of income and deductions.
It’s fairly obvious that most items of income and deductions are not reported in round numbers, for example the interest income from the bank accounts are likely to be $172 dollars as opposed to $180 dollars. Similarly, the home mortgage interest expenses is unlikely to be exactly $15,000, rather it would be $15,214. Thus, Consistently using round numbers on all items of income and deductions would raise a audit red flag with the IRS.
4. Taking Excessive Charitable Contribution Deductions.
The IRS maintains data on average Charitable Contributions made based on Adjusted Gross Income, and thus, if you claim Charitable Contribution Deductions that substantially exceed the average made per this income group, this would raise a audit red flag with the IRS.
5. Claiming expenses for travel and commuting expenses as Unreimbursed Business Expenses on Schedule A as a full time W-2 employee.
For example, a consultant claiming unreimbursed business expenses on Form 2106 for travel and commuting expenses as a Full Time Employee, then deducting these on Schedule A subject to the 2% AGI Limitation. Employees normal commuting expenses cannot be deductible as per IRS tax code. Thus, claiming these travel and commuting as "Unreimbursed Business Expenses" and deducting them on Schedule A will certainly raise a Red Flag with the IRS.