Top 5 IRS Red Flags That Could Trigger an Audit (And How to Avoid Them)

Nobody wants to hear from the IRS—especially when it’s about an audit. While the chances of being audited are relatively low, certain red flags on your tax return can raise the IRS's eyebrows and increase your risk.

At All State Tax Resolution, we help individuals and small business owners navigate audits, avoid costly mistakes, and protect their financial peace of mind. Here's what you need to know about audit triggers and how to stay off the IRS radar.

1. Reporting Too Many Business Expenses

If you're self-employed or run a small business, it’s tempting to write off everything—but going overboard can backfire. The IRS knows what’s “normal” for your industry.

Red flag example:

• Claiming 80% of your income as deductions when the average in your industry is closer to 30%.

✅ Avoid it: Make sure your deductions are legitimate, well-documented, and clearly business-related.

2. Failing to Report All Your Income

The IRS receives copies of your W-2s and 1099s. If you leave any of them out, expect trouble. Even digital platforms like PayPal and Venmo now report certain transactions.

Red flag example:

• Reporting $40,000 in income, but the IRS sees 1099s adding up to $60,000.

✅ Avoid it: Keep meticulous records, double-check your documents, and report every dollar—especially side gigs and freelance work.

3. Claiming the Home Office Deduction Incorrectly

This is a valid deduction, but only if it’s used exclusively for business purposes. If you use the space for both work and personal activities, it may not qualify.

Red flag example:

• Deducting 30% of your home expenses without having a defined workspace.

✅ Avoid it: Make sure your home office is separate, meets IRS guidelines, and is supported with photos, floor plans, and utility bills.

4. Big Charitable Donations (That Don’t Match Your Income)

Donating to charity is great—but if your donations seem disproportionately high compared to your income, it can look suspicious.

Red flag example:

• Earning $35,000 but claiming $20,000 in charitable deductions.

✅ Avoid it: Always get written receipts from charitable organizations and file IRS Form 8283 if your donation is over $500.

5. Filing Schedule C with High Income

The IRS pays close attention to Schedule C filers (self-employed individuals), especially those who claim high income without W-2s. High profits without a clear trail of expenses or a legitimate business model can attract scrutiny.

✅ Avoid it: Use a professional tax preparer or accountant to properly categorize your income and expenses—and avoid common self-employment mistakes.

⚠️ Already Got an IRS Audit Notice? Don’t Panic—Call Us.

If you’ve received a notice of an audit, the worst thing you can do is ignore it or try to handle it alone. The IRS has an entire team of auditors—you deserve someone in your corner too.

At All State Tax Resolution, we offer:

✅ Professional audit representation 

✅ Negotiation with the IRS on your behalf 

✅ Preparation of documentation and response letters 

✅ Peace of mind throughout the entire process

🛡️ Stay Compliant, Stay Confident

By knowing the red flags and avoiding common mistakes, you can reduce your chances of being audited—and if the IRS does come knocking, you’ll be prepared.

📞 Need audit help now? Contact us today for a free consultation and let’s get ahead of the IRS before they get ahead of you.