The IRS has informed that its 2025 tax season is going normally, although many Americans are quietly preoccupied with only one thing: the likelihood of facing an IRS audit. However, while the IRS says that only 0.38% of the tax returns were audited last year, coming reports suggest that the number of audits may increase this year due to the improved funding and enforcement by the IRS. The bright side is that you may lower the possibility of an audit by adopting a set of very easy steps.
Audits can be not only tough but also time-consuming. They might necessitate you to produce numerous papers, receipts, and even give explanations for your tax return. Yet most of the checks can be avoided by filing an authentic and a full return.
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What Are the Reasons for IRS Audits?
The answer to this question would be that the IRS has put it that audits mainly come when something in your fee return looks strange when it is compared with the fee returns of others in the same income group. That could mean taking much more deductions than a person with your same income and/ or reporting numbers that are not the same as the ones of your employers and banks.
Additionally, audits can be caused by a few simple mistakes e.g., the wrong Social Security number was entered or some sources of income were not included. Even the slightest errors can result in the IRS raising drastic questions.
(Source — IRS on Why Returns Get Flagged)
Step 1: Report All Your Income
Most probably the IRS already has lots of your income numbers. Lower-level employees, banks, and clients send your tax details directly to the IRS. In the event that your refund does not correspond to the IRS numbers, an IRS agent will figure this out.
Ensure that you include all W-2, 1099, and other types of income without fail. Moreover, sideline jobs, freelance work, and small contract jobs are required to be reported. Not reporting even insignificant amounts can have an impact on your audit possibility.
Step 2: It doesn`t work for them if you don`t let it work for you
Deductions serve the double purpose of reducing your income to be taxed and, at the same time, marking your activities as unusual or even too high. As an example, claiming charitable donations of a few thousand dollars, while receiving a small income, will likely result in the taxpayer being forced to provide supporting documents.
It is the advice of the specialists only to declare deductions that you are able to justify. In particular, it is good to save all papers that are related to deductions, such as office supplies, car use for business, or charitable donations.
(Source — IRS Guidelines on Deductions)
Step 3: Consider Your Business Expenses Carefully
Sole proprietors and small-business owners are most susceptible to the danger of overspending company resources. Always remember to keep your personal and business expenses completely apart. The practice of, for example, charging up personal meals, vacation, and/or home improvements as business expenses, and thus incurring a tax deduction, can lead to the IRS starting an investigation.
Additionally, you should be wary when it comes to declaring that you have diverted 100% of the car’s use for business. This situation is extremely rare with the IRS, so not having the correct support could result in the IRS initiating an audit.
Step 4: Submit Your Materials on Time and E-File, if Possible
If you file your tax returns late, it is very likely that you will get the attention of the IRS. By sending your return in good time or filing for a proper extension with Form 4868, in the first place, you are minimizing the opportunity for a trigger-mistake to happen.
The agency recommends you file via e-file. The IRS reports that e-filed returns have fewer miscalculations than paper returns, which decreases the likelihood of errors that are the root cause of audits.
Step 5: Review Your Return Twice Before You Send It
Even barely noticeable mistakes can grow into a big issue. An incorrectly filled Social Security number, an erroneous birth date, or a simple calculation error make it easier for the tax authority to contact the taxpayer. Please make sure to review the information multiple times before submitting, or consider going to a tax professional or use the software that has been certified by the IRS.
Should You Be Concerned About an Audit?
Only a small percentage of taxpayers go through an audit. Nevertheless, with the IRS recently getting more funding to tighten up its operations, industry specialists foresee a rather modest increase in the number of audits to be conducted in 2025 and the years to come. Using these steps puts you at a very low chance of becoming the subject of an audit.
If you are filing a complicated return, you may want to talk to a tax professional for more assurance. A professional can guide you on deductions, provide error prevention, and assist you with preparing a neater return.
For those who are interested, more detail is available in the IRS’s How to Avoid Common Audit Triggers article.
