The IRS Is More Likely To Consider You For Audit If You Make These 12 Mistakes

Every year, over 100 million Americans file their taxes for their household or themselves. Most of them go all out to do it by April 15, but the IRS can provide up to six more months (upon request) to submit tax paperwork. However, failing to file your taxes, even after the IRS grants you an extension, is playing with fire. You could end up facing fines and penalties that will see you give the IRS more money than you anticipated. Something else that could happen if you neglect filing your federal taxes by April 15 is that the IRS will take more drastic action to make you pay what you owe, such as issuing a legal claim on your property. There are also many things that can trigger an IRS audit beyond late filing.

But here's what you should keep in mind — submitting your tax returns before the end of Tax Day is not enough. You must get the job done right lest you trigger an audit. To avoid increasing your odds of triggering an audit, don't make these tax mistakes.

Most Americans wait until a day or two before April 15th to start filing their taxes. While there's absolutely nothing wrong or illegal about that, it leaves the door wide open for careless blunders like adding the incorrect Social Security Number (SSN) and miscalculating taxes owed, compelling the IRS to come after you. As you make a mad dash to file your tax returns on time, you might also forget to include the required receipts for your reported business expenses and donations, misspell your name, or add the wrong bank account.

Unfortunately, any of these seemingly small mistakes could land you in the pool of taxpayers to be audited. Even if luck's on your side and the IRS doesn't target you for an audit, the revenue service may reject your returns, requiring you to correct the errors made and resubmit them. This not only wastes your time but also forces you to wait a little longer to receive your refund in case you're eligible for one.

The best move to avoid making mistakes associated with last-minute filing is to take care of your taxes as soon as the tax season starts — this typically happens in January. That said, if you owe Uncle Sam, you can still file your taxes in April, but make sure to prepare them earlier to catch any mistakes.

According to the IRS, taxpayers with financial assets in foreign countries must share details about them via Form 8938, unless they want to find themselves on the wrong side of the revenue service. Members of that club include resident foreign citizens, American citizens, and various companies operating in the United States.

The general rule of thumb is that if you're a resident whose assets are above $50,000 by the time a particular tax year ends or $75,000 at any given moment, you're obligated to tell the IRS, to reduce your risk of an audit. However, if you're not a U.S. resident but still a citizen at the time of filing, the threshold increases to $200,000 at the year's end and $300,000 at any other time. Either way, see to it that you report your financial assets outside the nation or prepare to pay up to $10,000 in penalties. If the agency continually alerts you to your situation and you still decline to report your foreign properties, you may end up paying up to $50,000 in penalties.

Pretty much everyone, including the IRS, will be impressed when you contribute your assets to a good cause. Still, the revenue service monitors your income as well as donations. If you donate a huge sum despite not making as much money, such as $10,000 when you earn $15,000, it will be curious and forced to investigate you. One way to refrain from making this mistake is by being honest and claiming a reasonable donation, depending on your income. If you're really not trying to take Uncle Sam for a ride, provide proper documentation as proof of your donation, even if it's as little as $250.  

It's also important to ensure the donations you claim are eligible for deduction before writing them off. According to the IRS, the beneficiary can be a charity foundation lawfully operating in the U.S, a tax-exempt party like a religious institution or a non-profit that support veterans. However, donating money to political causes doesn't count.

Reporting the wrong income might seem like something that you can get away with, but it can culminate in an audit and land you in unimaginable trouble with the IRS. As per Forbes, it entails concealing how much you earn and secretly stashing money in offshore bank accounts that not even your confidant knows about.

The agency has systems in place to figure out when you're trying to hide the amount you earn. These include the Automated Underreporter (AUR) system, whose job is to assess your paperwork (W-2s and 1099s) and let the revenue service know of any inconsistencies in your returns. 

Forbes clarifies that the IRS sees misreporting your income as tax evasion, a crime that can earn you as much as half a decade in prison or see you pay a fine of $250,000. Depending on your case, the IRS may decide to punish you with both, begging the need to be honest when filing your tax returns.

Claiming that you didn't bring in any taxable income or you earned a low amount while living a luxurious lifestyle is one of the red flags that increases your chances of being audited. Contrary to popular belief, the IRS still invests time in looking into taxpayers' personal lives to confirm their reported income is enough to foot their high bills. Best believe that doing anything that looks suspicious, such as living in an upscale neighborhood while earning peanuts, is likely to invite attention from the tax people. 

The IRS uses various strategies to catch taxpayers whose reported earnings and lifestyles don't make sense. One is performing a Financial Status Analysis, which enables the agency to examine your lifestyle and decide if you're lying about how much money you made during a particular tax year. Officials from the revenue service may pay you a visit to get more details about your wages. And it's not unusual for them to go through your Facebook, X, or Instagram profiles looking for proof that the modest income you claim might not be enough to support your lavish lifestyle.

If you're an entrepreneur or sole proprietor, the IRS expects you to keep clear records that can verify your reported business income, expenses, and deductions. Failing to do so can see you lose the agency's favor and increase your likelihood of making mistakes when filing your tax returns. According to the IRS, some of the documents you should preserve include receipts, Form 1099-MISC, and invoices. The revenue service recommends storing the record for however long is necessary, so you might want to create a reliable system to do the same. 

As per the  U.S. Chamber of Commerce,  you can leverage secure cloud services to store your tax documents in an orderly fashion. The business website also recommends organizing your business receipts using management software like Veryfi. But although most of these tools are reliable, it's still smart to store your tax records elsewhere, such as on an external disk.

Reporting consecutive losses on Schedule C (Form 1040) is not unheard of, but unfortunately, it can make the IRS question the legitimacy of your business and multiply your chances of being audited. So, per Vyde, a Utah-based accounting firm, it makes sense to say that you have made losses for at least three consecutive years. However, anything more than that may seem unrealistic, and the IRS could consider your business venture a hobby and stop you from claiming various business deductions. 

If you can prove that yours is a business despite the losses, you still have a fighting chance. According to Vyde, sharing the strategies you plan to use to increase your revenue can keep the IRS at bay. At the same time, obtaining documents that demonstrate you're not wet behind the ears can stop the IRS from coming after you or labeling your business a hobby. It's also worth mentioning that the IRS may be a bit lenient with you, based on factors such as whether you solely depend on your business earnings to pay for your home or personal expenses.

Calculating taxes is like pulling teeth for most taxpayers, and even the IRS knows that. However, that doesn't give you the green light to be reckless and mess up your math — you risk making the list of individuals or businesses to be audited. The most common errors, according to this tax services provider, include adding your deductions and expenses as well as rounding off the numbers. Some taxpayers also pull numbers out of a hat, making it easier for the IRS to catch them. 

Taking advantage of reliable tax software is a tried-and-proven trick to refrain from making math mistakes when working on your taxes (via Investopedia). One of your best options is TurboTax Premium, although you may have to pay top-dollar for it. And of course, it has some downsides you might want to know about before using it. Getting a second pair of eyes before sending in your returns is a smart move to avoid this mistake.

Hiring the cheapest tax preparer makes perfect sense when you need assistance filing your taxes and don't want to burn through your savings doing it. However, if they're deceitful or have a history of committing tax fraud, the IRS will have a good-enough reason to target you for an audit. The IRS allows victims to blow the whistle via Form 14157, which gives it access to a list of dishonest tax preparers in a particular region.  

If you want to play it safe, learn how to select a reliable tax preparer. The IRS suggests watching out for red flags like being unreachable via phone or email before tax season begins. Chances are, they will not pick up your calls after it comes to a close. You can also take advantage of the Better Business Bureau, which provides tools and resources to uncover fraudulent businesses, to know if a preparer has any skeletons in their closet before asking them to join your team. According to Nerd Wallet, tax professionals who are against filing taxes online are a no-no as well.

While claiming various deductions and credits can lower the amount you owe in taxes and provide much-needed financial relief, it's not a smart move if you don't meet the criteria. For example, many taxpayers try to take advantage of medical deductions when doing their taxes, subtracting, for instance, money paid for tummy tucks, rhinoplasties, and other surgeries. Yet, the IRS clearly states that such expenses shouldn't be written off. Others include the money spent on essentials like beauty and personal care products, as well as the costs of sending off a loved one.

Again, some taxpayers try to benefit from the Earned Income Tax Credit (EITC), which can get you a tax refund worth as much as $8,000. According to the IRS, this credit is meant for American low-wage workers. Note that earned income in this case excludes benefits like a pension, so if that's all you receive, you're not eligible for EITC, and claiming it can trigger an audit.

You may have heard that the IRS has a knack for tracking digital currency transactions. It's true, and failing to report yours is a bad call, as U.S. News & World Report confirms. So, the first thing you should know is that to the revenue service, virtual currencies like Ethereum (ETH) are taxable assets, not a form of digital money as most people might perceive them. Therefore, if your clients used them to pay for products or services you provided, you must keep the IRS in the know. And the same case applies to any revenue earned from trading them.

Nowadays, covering your tracks after hiding your crypto transactions can be harder than you think. According to CCN.com, the IRS demands that all cryptocurrency exchanges and other financial service providers must give the government agency access to all transactions completed since the beginning of 2025. Thus, the IRS will more likely than not find out that you neglected to report your digital assets, and you could end up paying more than 70% of what you owe in penalties alone.

Telling the IRS you only used your ride for work-related activities is bound to raise suspicion, according to The Motley Fool, because the likelihood that you added up your business and personal expenses to inflate your deductions is high. This is especially true if you're a small business owner with one car. After all, it doesn't make sense to take the bus when going shopping in another city when your Honda Civic is sitting in your business' parking lot, right? 

Of course, there's nothing wrong with using your car for both work and personal stuff, but the IRS says you can only write off expenses incurred during the former, so that's exactly what you should do unless you're asking for trouble. You can leverage the mileage rates provided by the agency to calculate the correct business car expenses to deduct. Note that they vary from year to year, so you should check the IRS website to discover the rates to use for a specific tax year.