IRS Red Flags

As the IRS finds itself more and more stretched, the likelihood of an audit may decrease.  However, there are a number of “red flags” which can draw the IRS attention to your return. Here are some of the items which gain their attention.

  • Claiming 100% business use of a vehicle
  • Large Schedule C deductions for business meals, travel and entertainment
  • Hobby losses, especially if it sounds like a hobby, such as car racing and dog breeding
  • Rental losses, especially those written off by individuals with high W-2 income
  • Small business, especially high cash businesses, pizza shops, restaurants taxis, car washes, hair salons
  • Claiming deductions that are higher than the average
  • Failure to report a foreign bank account