7 Common IRS Audit Triggers and How to Avoid Them
Learn what draws IRS attention to tax returns and practical steps to reduce your audit risk without sacrificing legitimate deductions.
By Moore CPA Team
While the overall audit rate is low, certain red flags dramatically increase your chances. Here are the most common triggers — and how to protect yourself.
1. High Income
Returns with income over $500,000 are audited at nearly 10x the rate of average returns. If you're a high earner, accuracy and documentation are critical.
2. Large Charitable Deductions
Donating more than 5-10% of your income to charity can trigger a closer look. Always keep receipts, get written acknowledgment for donations over $250, and obtain qualified appraisals for non-cash donations over $5,000.
3. Home Office Deduction
The IRS knows this deduction is commonly abused. If you claim it, make sure your office space is used regularly and exclusively for business. The simplified method ($5/sq ft, up to 300 sq ft) draws less scrutiny than the regular method.
4. Unreported Income
The IRS receives copies of your W-2s, 1099s, and K-1s. If your return doesn't match their records, you'll hear from them. Always report all income — even cash payments and cryptocurrency transactions.
5. Excessive Business Expenses
Deductions that are disproportionate to your income — particularly meals, travel, and vehicle expenses — catch the IRS's attention. Keep detailed records: who, what, when, where, and business purpose.
6. Round Numbers
Expenses listed as exactly $5,000, $10,000, or $20,000 suggest estimation rather than actual record-keeping. Use precise figures based on your records.
7. Hobby Losses
If your business shows losses year after year, the IRS may reclassify it as a hobby and disallow your deductions. The general rule: you should show a profit in 3 of the last 5 years.
The Best Audit Defense
The best defense is a good offense: maintain thorough records, report all income, take only legitimate deductions, and work with a qualified CPA who can spot issues before the IRS does.
If you do get audited, don't panic — and don't face it alone. Our audit representation team is here to help.