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IRS Audit Triggers

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Large Business Expenses

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Reporting large, unusual or questionable business expenses can capture the IRS's attention.

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Foreign Bank Accounts

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Failing to report foreign bank accounts or transactions may trigger an audit due to regulations surrounding foreign assets.

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Cash Transactions

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Businesses with large cash transactions can be audited more frequently due to the difficulty of tracing cash.

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Earning Substantial Income

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High earners are more likely to be audited because there is a greater opportunity for additional tax revenue.

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High Home Office Deductions

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

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Crypto Currency Transactions

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Failing to report cryptocurrency transactions can cause an audit due to the increased focus on virtual currencies.

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Claiming Vehicle as 100% Business Use

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Claiming a vehicle solely for business use when it is also used personally can trigger an audit.

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Reported Income Discrepancy

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Disparities between reported income and the information on W-2s and 1099s can trigger an audit.

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Claiming Large Charitable Donations

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Excessively large charitable contributions in relation to income can raise flags with the IRS.

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Not Reporting Gambling Winnings

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Gambling winnings are taxable and must be reported; failing to do so can trigger an audit.

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Rental Losses

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Reporting rental losses, especially when not viewed as a real estate professional, may trigger scrutiny.

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Hobby Loss Rules

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Claiming losses on activities not engaged in for profit, known as hobbies, can prompt an audit.

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Claiming the Earned Income Tax Credit

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Incorrectly claiming the Earned Income Tax Credit (EITC), which is highly scrutinized due to its complexity and fraud potential, may result in an audit.

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Erroneous or Missing Forms

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Making errors on tax forms or failing to file required forms can lead to an IRS audit.

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Failing to Report a Foreign Trust

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Omitting information about a foreign trust could result in an audit due to the strict reporting requirements for such accounts.

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