Facing the IRS can be unsettling, even for those confident in their tax filings. While most returns pass through without issue, certain patterns or errors may prompt closer scrutiny. In 2023, the IRS completed around 580,000 audits, a small fraction of total filings but enough to keep many filers on alert.
According to Newsweek, a few common missteps tend to raise red flags more than others. Though the process varies by case, audits can involve detailed reviews, documentation requests, and potential penalties. Knowing what to avoid—and how to prepare—offers taxpayers a better chance of steering clear of complications.
What Is an IRS Audit?
An IRS audit is an examination of an individual’s or business’s financial records and tax returns to verify their accuracy and ensure compliance with federal tax laws.
Audits may occur through various methods, including correspondence audits (by mail), office audits, or field audits conducted at the taxpayer’s home, business, or representative’s office.
While some audits are initiated randomly, most are triggered by specific red flags, such as inconsistent income reporting, unusually large deductions, or mismatched documents submitted by third parties like banks or employers.
Common Triggers and High-Risk Areas
Speaking to Newsweek, Ahad Ali, CEO of Ahad&Co, emphasized the importance of accuracy and transparency in tax filings.
Try not to exaggerate your expenses and deductions – he said,
Noting that the IRS can detect when reported figures deviate significantly from typical norms.
Ali also pointed to the Earned Income Credit (EIC) as a common audit trigger:
We do see a lot of audits when it comes to getting the Earned Income Credit because that is a low-income credit, and it is a large amount that helps you get a very big refund.
The credit provides financial support for low-to-moderate income earners but demands careful documentation.
Incorrectly claiming dependents is another area of concern. For example, attempting to list a child who does not live with the taxpayer can result in the IRS requesting supporting evidence.
Although no tax return is immune to review, several actions can help reduce audit exposure. Taxpayers should accurately report all sources of income, including freelance and contract work.
Inflated or unsupported deductions—especially those related to home offices, vehicle use, or charitable contributions—should be avoided.
Maintaining organized records for all reported items, such as receipts, bank statements, and legal documents, is equally important. It is also essential to confirm eligibility for any credits or exemptions, particularly those involving dependents.
Ahad Ali recommends working with a licensed tax professional to ensure filings are both accurate and compliant.
What Happens During an Audit
If selected for an audit, the IRS will notify the taxpayer by mail. The process may involve exchanging documents by mail or scheduling an interview. Interviews may be conducted in-person at an IRS office, the taxpayer’s home or business, or their accountant’s office.
The IRS examiner will review submitted documentation and may request clarifications. Depending on the findings, the audit could result in no changes, an adjustment requiring payment, or, in rare cases, a refund.
The agency clarifies on its website that
The length varies depending on the type of audit; the complexity of the issues; the availability of information requested; the availability of both parties for scheduling meetings; and your agreement or disagreement with the findings.
If disagreements arise, the resolution may involve appeals or extended negotiations.
Taxpayers have the right to challenge findings through the IRS Office of Appeals, which operates independently within the agency.
