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Deductions That Often Trigger an IRS Audit

Deductions That Often Trigger an IRS Audit - San Diego Tax Attorney

Are there red flags or deductions that often trigger an IRS audit?  What are some of the known IRS audit triggers, and what should you be considering at this time?

With the end of another year approaching, many of our clients are already considering tax preparation and planning for 2022.  Allen Barron is uniquely positioned to help in all areas of tax planning, tax preparation and representing you or your business before the IRS or a California tax agency.

There are three deductions that often trigger an IRS audit which have been recently been cited in USA Today:  Home Office Deductions, Charitable Donations and a substantial change in income or losses.  Home office deductions must be carefully considered as this opens many areas of inquiry for the IRS.  Many Americans work from home, especially during the pandemic, and it is appropriate and legal to claim a percentage of related expenses on your tax return.  The primary issues associated with this deduction are documentation and an appropriate percentage of the actual space set aside in your home and dedicated for business purposes.

Charitable donations have become much more regulated over the past several years.  Most charitable organizations, especially churches and service organizations, are now reporting specific contributions and tying them to a specific taxpayer.  You will be required to document charitable contributions, and the IRS maintains a substantial data analysis of typical giving trends.  If you are outside of the “normal” curve for charitable contributions they can be deductions that often trigger an IRS audit.

Substantial income, or significant changes in income or losses are a primary focus with the IRS.  If you are experiencing a substantial increase or decrease in income or reporting substantial losses you should have substantial documentation (in real time) and be prepared to fully explain to the IRS the circumstances surrounding the changes.

IRS audit algorithms are a tightly kept secret, but there are identifiable trends and deductions that often trigger an IRS audit.  If you are concerned about an IRS audit or have been contact by an IRS Revenue Officer or Notified of an upcoming audit you should contact us immediately or call today to schedule a free and substantive consultation at 866-631-3470.

Learn about the protections of the attorney-client privilege and why a US taxpayer should never communicate directly with the IRS.