The IRS audits a small percentage of returns, but certain patterns increase your chances significantly.
High Schedule C Deductions Relative to Income
Unusually high deductions — particularly those resulting in a loss — draw scrutiny. Document every deduction.
Home Office Deductions
Legitimate and valuable, but a classic trigger. Use the dedicated space exclusively for business. Keep measurements and photos.
Round Numbers Everywhere
A return full of round numbers suggests estimation. Track actual expenses and report real amounts.
Unreported Income
The IRS receives copies of every 1099. If your income doesn’t match, you’ll hear from them.
Large Meal and Vehicle Deductions
Both require substantiation. For meals: amount, date, place, purpose, attendees. For vehicles: mileage log or actual expense records.
How to Protect Yourself
Good records, accounting software, monthly reconciliation, and a CPA who reviews for red flags before filing.
Disclaimer: The information provided is for general educational purposes only and does not constitute tax, legal, or investment advice. This content is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Tax outcomes depend on your specific facts and circumstances. Viewing this material does not create a CPA-client relationship. Personalized advice is provided only through a signed engagement letter.
Get Tax Tips from Greg
No spam, unsubscribe anytime.