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LAST UPDATE: 9/19/2015


Tax Tips for Small Business

IRS Audit Triggers
by Steven Klitzner

Even though the IRS only audits around 1.5 percent of all tax returns it receives, fears of being audited by the IRS are on the minds of a much larger percentage of taxpayers. But there are things that you can do to avoid being one of the chosen few who gets audited. Here are 5 of the top IRS audit flags to avoid:

1. Incorrect Information: One of the most common reasons for IRS audits is often the result of transposing a number or two. Errors in you or your dependant's social security numbers tend to draw unwanted audit attention. Other IRS audit flags include differences in reported numbers between your tax return and your W-2 and 1099 forms.

It's also worth noting here that married couples filing separately may increase the chances of an IRS audit, as there's a greater likelihood of inadvertently including inconsistent information between the two returns.

2. Home Office Deduction: While there's been an explosion in the number of people working from home, there has also been an explosion in the number of home office deductions that are taken by individuals who don't fully qualify for them. If you do include deductions for a home business, realize that your tax return will be scrutinized more closely—especially if you claim large home office expenses for a business that generates relatively little income.

3. Excessive Charitable Contributions: Charity begins in the home, but the IRS may decide to knock on your door if your charitable contributions are deemed 'excessive' for your level of income. Don't stop giving to charity, but do realize that contributions that aren't in line with your income may be an IRS audit trigger.

4. No Explanation: Whenever you're doing something that can't be fully explained by checking a box on a form, you'll want to include an explanation. For example, if you aren't able to send a full payment for your taxes due, you'll want to send a partial payment and file Form 9465, the Installment Agreement Request with your return.

Or if you're reporting unusual personal or business transactions, leaving the IRS to wonder about why you handled something a certain way is a surefire IRS audit flag. Include an explanation about out-of-the-ordinary items on your tax return and you're less likely to set off IRS audit triggers.

5. Audit History: If you've been audited before, your tax return will draw attention in the future. But also be careful of the company you keep—tax preparers whose clients have been audited in the past are more likely to trigger IRS audit flags on the returns they prepare in the future.

About the author:

Steven Klitzner from Florida Tax Solvers is a qualified tax attorney who specializes in helping people resolve their IRS tax problems. Visit for more information about his services.