Although it is exceedingly rare for IRS audits to occur, there are several red flags that can trigger an IRS audit. Individuals with higher incomes are generally more likely to be a target for audits. As well, any discrepancies in an individual’s reported income can lead to an audit. This includes earnings from all sources: both wages and pensions alike. Taking large deductions, being a business owner, and not reporting earnings from gambling can also contribute to the likelihood of an IRS audit.
Key Takeaways:
- Once you reach age 70 1/2, failure to take your required minimum distributions from an IRA or 401k may draw the attention of the IRS.
- The IRS knows that some self-employed individuals claim excessive deductions, so be careful with Schedule C.
- Casinos are likely to report your gambling winnings on Form W-2G, so be sure to report them on your own tax forms.
“Just understand that the more income shown on your return, the more likely it is that you’ll be hearing from the IRS.”
