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15 Common IRS Red Flags

1. Math errors

2. Returns that are filed without the necessary supporting tax return schedules

3. Unrealistic figures (such as frequent occurrence of rounded numbers)

4. Major, not easily explainable, changes in comparison with prior tax returns

5. Certain occupations where payments are commonly made in cash (for example hairdressers)

6. Non-incorporated businesses reported on a Schedule C (Large amounts of income make this even more of a target)

7. Home office expenses shown on Form 8829

8. Interest or dividend income that does not agree with 1099 amounts submitted to the IRS

9. High mortgage interest in relationship to income

10. Travel and entertainment expenses that exceed the industry norm

11. High damage or theft loss deductions

12. Low S Corporation shareholder salaries in relation to other distributions

13. Business losses several years in a row

14. Deductions for "independent contractors" (versus employees) on business returns

15. Use of offshore trusts or credit cards

(This information is designed to be of general interest.  The specific techniques and information discussed may not apply to you.  Before acting on any matter contained herein, consult with your professional advisor.)


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