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Tax Audit Triggers
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Significant Changes in Income
Large fluctuations in income can indicate unreported earnings or potential errors.
High Income
High-earners are more likely to be audited because they are considered to have more complex returns and potential for error.
Home Office Deduction
Claiming the home office deduction can be a red flag if the space is not exclusively used for business purposes.
Large Charitable Donations
Donations that are disproportionately large compared to income can seem unusual and may require proof.
Using Rounded Numbers
Reporting expenses or income in rounded numbers may suggest estimations rather than precise calculations.
100% Business Vehicle Use
Claiming a vehicle is used only for business purposes is often scrutinized due to the potential for personal use.
Reporting Losses Year After Year
Continuous reporting of business losses might indicate hobby losses or fraudulent reporting.
Failing to Report All Taxable Income
The IRS receives copies of all 1099s and W-2s, so missing income can lead to a mismatch with IRS records.
Claiming Day Trading Losses on Schedule C
Claiming to be a professional trader with day trading losses can be questioned if trader status isn't met.
Cashing Out Retirement Funds Early
Early withdrawal from retirement funds can attract attention due to potential penalties and incorrect reporting.
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