The IRS reported, in their 2005 IRS Data Book, that the number of audits last year increased by 21% to 1.2 million returns, which followed an increase of 19% from 2004 to 2005.
CNNMoney did a piece on the five audit red flags and they were:
- Overkill on charitable contributions – especially non-cash contributions, make sure you have documentation/receipts.
- Too many deductions for the self-employed – That big vehicle deduction didn’t make the IRS happy…
- Above-average deductions – The IRS has data on how much each income’s average deduction should be and if you’re out of line, they’ll be curious. Honestly though, if you’re taking deductions correctly, there’s nothing you can do about this one.
- Making six figures – Thanks for the tip but what are you supposed to do, make less?
- Careless omissions – Do it electronically and it’s less likely to have spelling mistakes or something like that.