Seven Common Audit Triggers and Ways to Avoid Them
The IRS has made no secret of the fact that it is ramping up audits in order to close the "tax gap." The "tax gap" is the difference between what the IRS expects to collect and what it actually does collect. In 2005, the IRS estimated this gross tax gap, before collections efforts, to be approximately $345 billion.
The good news is that the IRS doesn't expect to shrink the tax gap with random audits. While it's true that some returns are randomly selected for examination, most of the time the IRS has a reason for plucking a form 1040 out of the pile. In other words, audits are generally triggered by a specific item or pattern of behavior on your tax return (or tax returns). Following is a brief checklist of items or behaviors that might trigger an audit: