4 Tax Return Red Flags That Could Get You Audited

No one wants a visit from the IRS. Get expert advice on how to avoid triggering a tax audit.

Tax Return Red Flags

by NEA Member Benefits

Mar 04, 2024

Simple mistakes can happen to anyone. For instance, you might inadvertently transpose some digits of your child’s Social Security number (SSN) on your tax return, and within 24 hours of filing, you get a notice from the Internal Revenue Service (IRS) that your tax return has been rejected.

No need to panic in a situation like that, though. Simple, innocent mistakes aren’t likely to trigger a tax audit. Typically, you’ll have the opportunity to correct your mistake so your return can be processed.

It can be much better to e-file your tax return, as more and more people are doing, rather than by mailing in a paper copy, because gaffes are easier to fix electronically. 

If you were to type your child’s Social Security number wrong on the paper copy, the IRS can correct that mistake for you. However, their way of fixing it could be to simply remove the child—and their deductions—from your return. Then you’d have to file an amended return if you want to correct the IRS’s “quick fix.”

Why do people get audited?

Such inadvertent mistakes aren’t viewed or treated the same way as tax return information that could be a sign of a bigger problem: potential tax fraud.

The IRS is on the lookout for information on returns that simply doesn’t add up. Tax audits can be random, or they could be initiated by auditors who want to take a closer look at the tax forms you’ve filed.

Information that’s out of the ordinary tends to catch the eye of an auditor. The IRS might be comparing your returns to tax filers who are similar to you, to look for inconsistencies. Or if your taxes intersect with another filer’s—such as if you’ve had business or investment transactions with someone else—the IRS may want to ensure all that information squares up and no tax evasion is occurring.

A tax audit could be conducted by mail, or online, or by an IRS agent visiting you. However the audit occurs, the process takes up time you probably don’t have to spare, so it’s best to take care to ensure you’re filing accurate tax forms from the start.

4 tax audit triggers to avoid

Here are four red flags you should watch out for on your tax returns this year to minimize the likelihood of triggering an IRS audit:

1. Your numbers don’t match up

An examination or audit may be triggered when reported income or deductions don’t match up with the documents the IRS has on file—in your W-2s, 1099s, 1098s and so forth.

For instance, if you want to get a tax break on tuition expenses under the lifetime learning credit (LLC), the tuition you put in your tax return to figure the credit should match the information on the Form 1098-T that the school sends directly to the IRS.

If there’s a big discrepancy, or no 1098-T at all, then a request for more information may be triggered.

“Most examinations for individuals are correspondence examinations,” says Jackie Perlman, principal tax research analyst at H&R Block’s Tax Institute.

“You’ll get an audit letter from the IRS. Be sure to read it. It doesn’t mean you’re in trouble or that you’re going to jail.”

The tax examiners are simply looking for an explanation for the discrepancy.

2. You include self-reported information

Perlman says the most “auditable” information on the tax return is that which is self-reported, such as charitable donations and deductions.

“The important thing is to keep very good records,” she says. “Be sure you have documents to back up everything you put in your tax return.”

For example, if you simply estimate that you gave as much to charity this year as you did last year without really checking and adding up your receipts, that self-reported tax deduction could be removed, at least in part, upon examination.

3. Your records aren’t 100% accurate

Record-keeping also is essential for outside income from part-time jobs or tutoring, Perlman says, and the best thing of all is “contemporaneous” record-keeping. “The IRS loves that word,” she says. “Tax courts love that word.”

“Contemporaneous” means keeping your records of your taxable income and expenses as you go along, rather than waiting until the end of the year and trying to reconstruct everything. Or worse, putting records together after you receive an IRS notice. And, of course, you should keep receipts for everything.

If you have good records and backup documents, an examination can be fairly painless. You simply supply the information requested to the IRS, any necessary adjustments are made, and everybody is happy.

4. You fudge some numbers and hope no one notices

“You are not supposed to play the audit game,” Perlman cautions, meaning you shouldn’t count on the IRS not to audit you because your deductions for charity are reasonable or in line with what most people have noted on their tax returns.

“Honesty is the best policy” if you don’t want to worry about an IRS audit, Perlman says.

Occasional income from tutoring, for instance, whether paid in cash or check, won’t be spotted by the IRS if you don’t report it. “You’re supposed to report all your income, regardless of how you are paid,” Perlman says.

The more serious form of audit—a face-to-face encounter—is reserved for people with higher incomes. “The higher the income,” Perlman says, “the likelier the audit.”

Tax prep tips for NEA members

Tax software can walk you through the different sections of your tax forms to guide you toward filing it out accurately and completely. Review a comparison of tax software options, and check to see what kinds of deals you can find on tax prep programs with the NEA Discount Marketplace. Look under the “Office Supplies” filter and click on “Finance & Tax Prep” to see what deals and cash-back offers are currently available for NEA members.

If your situation is more complicated, consider paying a professional tax preparer to handle your taxes.

Earn cash back on tax preparation software