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These Red Flags Can
Trigger an IRS Audit

Tax season is in full swing and top of mind for all taxpayers is the fear of being audited.

Avoid these RED flags that can trigger an IRS audit, says Dave Du Val, Chief Customer Advocacy Officer at, as you prepare your 2016 returns.

“The IRS loves to pounce on people who report high itemized deductions, especially for charitable contributions and employee business expenses. It’s fine to claim these legally allowable deductions for your actual qualifying expenses, but make sure you have your documentation on hand before you file your tax return,” says Du Val. Other little known red flags for audits include:

1. Business Income and Expenses that are out of whack: The IRS is always on the lookout for both unreported income and high expenses. Self-preparers should be cautious of accidental duplication of employee and business expenses, and of taking losses on activities that could appear to the IRS to be due to a hobby rather than a business activity.

2. Inflated Rental Property expenses: Tax returns with what appear to be inflated rental expenses are frequently caught in the IRS net. Some of the deductions on the Schedule E, where the income and expenses for rentals are reported, can be easily misinterpreted. Those who prepare their own tax returns should take the time to understand the deductions they are claiming. Not knowing the difference between a deductible expense and one that must be capitalized over a number of years could result in disaster in an audit.

3. Filing Status and Dependency Issues that don’t match up: When two people claim the same dependent the IRS gets involved. Although separated and divorced parents who have custody have the clear advantage, they still have to prove everything by providing birth certificates, school records, and more. Those who file using the Head of Household filing status are often questioned as well.

Editor’s Note: David is a tax expert, tax educator, and taxpayer advocate; is the leading audit defense firm and the service provider for TurboTax’s audit defense offering that is available to all self-preparers using their software.

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