21 December 2025
Let’s be real—no one wants to be audited by the IRS. It’s like getting an unexpected knock on your door from someone you haven’t invited in years. You didn’t plan for it, you didn’t ask for it, and now you have to deal with it. The thought of an IRS audit can strike fear into the hearts of even the most honest taxpayers. But what if there were ways to avoid that dreaded letter in the mail?The good news is, there are! While you can’t completely eliminate the possibility of an audit, there are definitely steps you can take to reduce your chances. In this article, I’ll walk you through the major red flags to watch out for and how to steer clear of them. Ready? Let’s dive in.
What Is an IRS Audit, Anyway?
Before we get into the nitty-gritty, let’s get clear on what an audit is. Essentially, an IRS audit is when the IRS decides to take a closer look at your tax return to make sure everything is on the up-and-up. They’re checking to see if you’ve reported your income accurately and paid the right amount of tax.
There are different types of audits—some are just letters asking for clarification or more documents, while others involve sit-down meetings where the IRS digs deeper into your finances. Either way, it’s time-consuming, stressful, and not something most of us want to go through.
So, how do you avoid it? Let’s look at the red flags that could trigger an audit.
Red Flag #1: Reporting Too Much (Or Too Little) Income
One of the biggest things that can trigger an audit is discrepancies in your reported income. If you make a lot more or a lot less than people in similar situations, the IRS might raise an eyebrow.
Too Much Income?
Believe it or not, making a lot of money can make you a target. If your income is unusually high, the IRS could think you’re hiding something. It’s like you’re waving a red flag saying, “Hey, come check me out!” The more you make, the more scrutiny you can expect. This doesn’t mean you should aim to make less money (because, let’s be honest, no one’s doing that), but know that the higher your income, the more careful you need to be with your tax return.
Too Little Income?
On the flip side, if you report a suspiciously low income, the IRS might assume you're underreporting or hiding some of your earnings. If you own a business and report only a fraction of your income, it’s like you’re asking the IRS to come knocking. They know what the average income looks like for different industries and professions, so if you’re way below the mark, be prepared for questions.
Red Flag #2: Claiming Too Many Deductions
We all love deductions—they lower the amount of income that’s taxed, and who doesn’t want to owe less to the IRS? But be careful with them. Claiming too many deductions, especially if they seem out of line with your income, can definitely raise red flags.
Business Deductions
If you’re self-employed or own a small business, you’re probably familiar with business deductions. Things like travel expenses, office supplies, and even a home office can be deducted. However, if you’re claiming extravagant deductions that don’t seem proportional to your income, the IRS may want to take a closer look. For example, if your business made $50,000 but you’re claiming $40,000 in deductions, that’s going to look suspicious.
Charitable Donations
Donating to charity is a great thing, and there’s a tax benefit to it, too. But if your charitable donations are unusually high compared to your income, the IRS might want to verify those claims. For instance, if you’re making $50,000 a year and donating $20,000 to charity, the IRS may wonder how you’re paying your bills.
Home Office Deduction
The home office deduction is another area that can easily trigger an audit. To qualify, your home office must be used exclusively for business. If you're using your guest room as an office during the day but it doubles as a family movie room at night, you can’t claim it. Be honest with how you’re using your space, or you might end up in hot water.
Red Flag #3: Math Errors
This seems like a no-brainer, but you’d be surprised how many people make simple math mistakes on their tax returns. And guess what? The IRS notices. Whether you’re filing your taxes by hand or using software, double-check your numbers. If the math doesn’t add up, it could trigger a deeper look into your return.
Even a small error can snowball into a bigger issue. For example, if you accidentally transpose numbers or forget to carry the one, it could make your income look artificially inflated (or deflated), and the IRS might think you’re intentionally fudging the numbers.
Tip: Use tax software or hire a professional to avoid these kinds of mistakes. Most tax preparation software will do the math for you, but it’s still a good idea to review everything before submitting.
Red Flag #4: Failing to Report All of Your Income
This one’s a biggie. If you don’t report all of your income, you’re practically begging for an audit. Whether it’s a side hustle, freelance work, or investment income, the IRS likely already knows about it. Thanks to 1099 forms, the IRS gets copies of most of your income reports, so if your tax return doesn’t match what they have on file, they’ll be on you like white on rice.
The 1099 Trap
If you freelance or have side gigs, you’re probably familiar with 1099 forms. But here’s the catch: you might not receive a 1099 form if you made less than $600 from a particular client, but that doesn’t mean you can skip reporting that income. The IRS expects you to report all your earnings, even if you didn’t get a form. Missing income is one of the biggest reasons people get audited, so don’t fall into this trap.
Red Flag #5: Claiming Dependents You're Not Entitled To
Trying to claim dependents that you aren't entitled to is a surefire way to trigger an audit. The IRS has specific rules about who qualifies as a dependent, and they take them seriously.
For instance, you can’t claim your cousin who stayed with you for a month as a dependent. And if you’re divorced, only one parent can claim the children as dependents—so make sure you and your ex are on the same page about who’s claiming the kids. Trying to double dip on dependents is a fast track to an audit.
Red Flag #6: Huge Cash Transactions
The IRS has a sharp eye on large sums of cash. If you’re dealing with large cash transactions, it raises questions. Where did you get all that cash? Why isn’t it showing up in your reported income? If you deposit or withdraw more than $10,000 in cash, the bank is required to report it to the IRS.
Now, there’s nothing inherently wrong with using cash, but if your cash transactions don’t seem to match the income you’re reporting, the IRS may want to investigate. It’s a red flag they won’t ignore.
Red Flag #7: Foreign Accounts and Assets
If you have foreign bank accounts or assets, the IRS expects you to report them. Failing to disclose foreign accounts is a major no-no and could not only trigger an audit but also lead to hefty penalties. The IRS has stepped up its efforts to crack down on taxpayers hiding money overseas, so if you have foreign assets, make sure you’re in compliance with the reporting requirements.
FBAR (Foreign Bank Account Reporting)
If you have more than $10,000 in foreign accounts at any time during the year, you’re required to file an FBAR (Foreign Bank Account Report). If you don’t, the IRS will see it as an attempt to hide income, and that’s a fast track to an audit or worse—criminal charges.
Red Flag #8: Early Withdrawals from Retirement Accounts
We get it—sometimes life throws you a curveball, and you need to dip into your retirement savings. But if you take early withdrawals from your 401(k) or IRA, you’ll not only face penalties, but you might also attract IRS scrutiny.
Why? Because the IRS wants to make sure you’re paying the required taxes on those withdrawals. If you don’t report them correctly, it could lead to an audit.
Final Thoughts: Be Honest and Stay Organized
At the end of the day, the best way to avoid an audit is to be honest and organized. Keep detailed records, report all of your income, and don’t try to game the system with exaggerated deductions or false claims. If you’re ever in doubt, consult with a tax professional—it’s better to be safe than sorry.
While you can’t guarantee that you won’t be audited, by avoiding these red flags, you can drastically reduce your chances. Think of it like driving—there’s always a possibility of getting pulled over, but if you’re following the rules of the road, you’re much less likely to get stopped.
So, the next time tax season rolls around, keep these tips in mind, and you’ll be much more likely to fly under the IRS’s radar. Happy filing!
