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12 Common Tax Mistakes That Could Lead to an IRS Audit

February 4, 2021 · Saving & Spending

What are the chances of getting an IRS audit? More importantly, what are YOUR odds? A lot of people ponder this question come tax season, and some might have legitimate grounds for concern. But the truth is that the odds are in your favor.

Only 0.4% of all individual tax returns were audited by the IRS in 2019 alone. Of those, 80% of exams were conducted by mail, so very few people actually met with an IRS agent face to face.

Given the coronavirus pandemic, it’s likely that the IRS’s enforcement efforts will also drop.

But you’re curious by nature and you always want to be on the safe side, right? In that case, read on to check out some of the red flags that could lead to an audit!

Making a Lot of Money

Think about it, only one in around 250 returns might raise suspicions for the IRA, so there isn’t much you should be worried about. That being said, the chances go higher as your income goes up. If you’re nearing retirement, for example, and want to sell a valuable piece of property, your income will inevitably increase. The same goes for big payouts from retirement plans, too.

People with incomes between $200,000 and $1 million who did not file a Schedule C had an audit rate of only 0.4% in 2019. The rate increased slightly, up to 1%, for those that did file a schedule C. Again, the rate jumped to 2.4% for those who reported $1 million or more.

Does that mean your aim should be to make less money? Far from it! The chances of hearing from the IRS are ridiculously low, even if they do increase along with your income. If you’re not doing anything shady, there’s no reason for you to worry!

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