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No one wants to hear from the IRS about an audit, but the reality is that some tax returns are more likely to draw attention than others. While most taxpayers may never face an audit, certain patterns or errors can increase your chances. Here’s what you need to know to avoid unnecessary scrutiny and stay on the safe side.

1. Mistakes on Your Tax Return

Simple errors, like math mistakes or discrepancies between your tax return and the income reported on W-2s or 1099s, are common triggers for audits. The IRS uses automated systems to catch inconsistencies, so double-check your numbers before filing.

2. Earning a High Income

The more you earn, the more likely your return will be reviewed. High-income earners are naturally subject to more scrutiny, especially if their deductions or credits seem disproportionate to their income.

3. Claiming Excessive Deductions or Credits

If you claim unusually large charitable donations, home mortgage interest, or tax credits compared to others in your income bracket, the IRS might want to verify your claims. Be sure to have proper documentation for every deduction or credit.

4. Running a Cash-Heavy Business

If you’re self-employed or operate a business that primarily deals in cash, such as a restaurant or a salon, the IRS may want to ensure you’re reporting all income. Keep detailed records of your income and expenses to back up your return.

5. Claiming 100% Business Use of a Vehicle

It’s rare for anyone to use a vehicle exclusively for business purposes. Unless you can prove it with meticulous logs, claiming 100% business use could raise red flags with the IRS.

6. Taking a Home Office Deduction

The home office deduction can be tricky. The IRS has strict rules: the space must be used exclusively and regularly for business. If your “home office” doubles as a guest room or family space, it might not qualify.

7. Big Changes in Income or Deductions

A sudden spike or drop in income—or claiming deductions that are drastically different from previous years—can catch the IRS’s attention. While life changes happen, you’ll need documentation to explain any significant shifts.

How to Stay Audit-Proof

While you can’t completely eliminate the possibility of an audit, you can lower your risk with these tips:

• File accurately: Double-check for errors and ensure your numbers match all forms.

• Keep good records: Save receipts, invoices, and documentation for deductions and credits.

• Don’t exaggerate: Be realistic about deductions, especially for business use of vehicles or home offices.

• Work with a tax professional: To minimize confusion and your audit risk, work with a tax professional.

By staying organized and truthful, you’ll have nothing to fear—even if the IRS comes knocking.

What’s Happening at Carry?

Here’s what you can expect in the coming weeks

See the full list of events here. ⏰

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If you want more resources on building wealth as a solopreneur/entrepreneur, check these out:

• The Solo 401k handbook

• The Roth IRA handbook

• The Self-Directed IRA handbook

• The Guide to Paying Less in Taxes

• What is a Solo 401k?

• How to Open a Solo 401k