| Here's why your tax return may be flagged by the IRS | | |  | WED, FEB 09, 2022 | | | | No one wants to be audited by the IRS. It's like someone looking forward to a root canal.
So, why take any chances? Your goal should be to submit an audit-proof tax return by following all IRS guidelines and be honest and document everything you submit.
An audit happens when the IRS flags your tax return and reviews it for accuracy. The IRS is auditing fewer returns due to federal budget cuts, and the odds of actually being audited are around 0.4%. Still, that doesn't mean you should let your guard down when it comes time to file your return.
When returns are filed they are scanned into the IRS computer system, which is designed to detect anomalies. If there is an anomaly, that creates a "red flag." The IRS is more likely to flag your return if you claim certain tax breaks, deductions or credit amounts that are unusually high compared to national standards, tax experts explain. Needless to say, always make sure you have the paperwork to support those claims.
Here are a few things that will raise a red flag and could increase your chances of some unwanted attention from the IRS: failing to report all taxable income; taking higher-than-average deductions; taking disproportionately large charitable deductions compared with your income; claiming rental losses; taking an alimony deduction; claiming a home office deduction; failing to report a foreign bank account, and taking an early payout from an individual retirement account or 401(k) plan.
The bottom line: Try not to stand out, tax experts say. The IRS looks for unusual patterns when deciding which returns to audit.
So, choose those deductions and tax credits wisely. There are many tax credits and tax deductions available, so you might think you are eligible for some when, in fact, you actually aren't eligible. If you have way too many deductions and credits than the average taxpayer, you may raise some red flags. Make sure the tax credits and deductions you claim can actually be claimed and that you can back it up.
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