Personal Finance

3 Reasons You Might Get Audited by the IRS

The odds of being audited by the IRS are low. Fewer than 1% of tax returns are singled out for review. Your chances can go up, though, if you raise certain red flags. Here are three of them.

See Also: The Most Overlooked Tax Deductions

Reason #1: You make too much money

Audit odds go up as your income goes up. Make more than $200,000? There's a 1-in-37 chance your return will be audited. Make a million? It's 1 in 13. But if your income is less than $200,000, the rate drops to just 1 out of 128 returns. (To see where you rank as a taxpayer try our simple tax calculator .)

Reason #2: You run a small business

Running a small business can attract the attention of IRS agents, who know from experience that self-employed taxpayers sometimes claim excessive deductions and don't report all income. Special scrutiny is given to cash-intensive businesses such as taxis and hair salons.

Reason #3: You make large charitable deductions

The IRS knows the average charitable donation for taxpayers at your income level. If your donations are unusually large, they might draw attention. Keep receipts and get appraisals for valuable donations.

There are 13 more tax audit red flags you should know about. Take a look.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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