5 Common IRS Audit Triggers

While the overall audit rate for individual taxpayers is relatively low, certain items on your tax return can significantly increase your chances of being selected for examination. The IRS uses a computerized scoring system called the Discriminant Information Function (DIF) that compares your return to statistical norms for taxpayers with similar income levels and filing characteristics. Returns that deviate significantly from these norms receive higher scores and are more likely to be flagged for review.

Among the most common audit triggers are: unreported income, which the IRS can easily detect by comparing your return to the W-2s and 1099s it receives from employers and financial institutions; disproportionately large deductions relative to your income; claiming the home office deduction, especially for employees; significant Schedule C losses that offset other income; and large charitable contributions that seem inconsistent with your income level. Understanding these triggers does not mean you should avoid legitimate deductions, but it does mean you should keep meticulous records to support every item on your return.

If you are concerned about audit risk or have received a notice from the IRS, consulting with a tax professional before responding can help you understand your rights and develop a strategy for the best possible outcome.