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Tax Audit Triggers

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Significant Changes in Income

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Large fluctuations in income can indicate unreported earnings or potential errors.

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High Income

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High-earners are more likely to be audited because they are considered to have more complex returns and potential for error.

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Home Office Deduction

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Claiming the home office deduction can be a red flag if the space is not exclusively used for business purposes.

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Large Charitable Donations

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Donations that are disproportionately large compared to income can seem unusual and may require proof.

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Using Rounded Numbers

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Reporting expenses or income in rounded numbers may suggest estimations rather than precise calculations.

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100% Business Vehicle Use

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Claiming a vehicle is used only for business purposes is often scrutinized due to the potential for personal use.

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Reporting Losses Year After Year

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Continuous reporting of business losses might indicate hobby losses or fraudulent reporting.

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Failing to Report All Taxable Income

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The IRS receives copies of all 1099s and W-2s, so missing income can lead to a mismatch with IRS records.

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Claiming Day Trading Losses on Schedule C

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Claiming to be a professional trader with day trading losses can be questioned if trader status isn't met.

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Cashing Out Retirement Funds Early

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Early withdrawal from retirement funds can attract attention due to potential penalties and incorrect reporting.

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