If you wish to avoid a tax audit (who doesn’t, right?) then you should know what reasons the IRS may have to call an audit on your tax returns. Here are the five most common reasons for doing so.
The first and most common one is a mismatch of information on your tax return and W2 and 1099 that you receive. Information on your income and withheld taxes are reported to the IRS and so the information you submit in your taxes should tally with what has been reported to the IRS. If there is a discrepancy, the computers at the IRS would pick it up and you will be called for an audit.
Another factor that brings about an audit is when married couples who file separately claim the same deduction on their tax submissions. Such couples likely paid for the deductible expenses jointly. In such a case, you should apportion the deduction you wish to claim for between yourself and your spouse.
The third type of discrepancy that results in an audit is a mismatch between the amount of deductions you claim and the income you earn. One taxpayer was called for an audit when he reported business income of $25,000 but made business claims of $18,000.
The fourth factor that makes for an IRS audit is a Schedule C income of $100,000 or more. Schedule C is for those who are self-employed. The IRS has found that those who fill Schedule C are more likely to understate their income and overstate their expenses.
Finally, if you work in certain occupations the likelihood of getting an audit is higher than normal. This is because the IRS has found these occupations tend to produce tax returns that are more likely to be noncompliant. These industries are gas retailers, taxi drivers, air service operators, auto dealers etc.