Monday, January 28, 2019


I often see blog posts and online articles that identify IRS “red flags”, more frequently during the tax filing season.  These posts tell you that if you claim a certain deduction or credit your tax return will have a greater likelihood of being chosen for audit by the IRS.

I don’t like these “red flag” posts and articles.

Read my lips –

Do not fail to claim a legitimate, documented tax deduction or credit on your federal or state income tax return just because you read somewhere that it is an IRS “red flag” and that claiming it will automatically result in an IRS audit.

(1) If your deduction is legitimate and you have sufficient documentation to prove its authenticity in an audit then what is the problem? An audit is not something that must be avoided at all costs – it is merely an inconvenience.

(2) Just because the IRS pays closer attention to tax returns that contain certain deductions or credits does not mean if you return contains this deduction of credit you will “automatically” be audited. The IRS only audits a small percentage of 1040s (less each year as Congress continues to underfund the IRS) – and several factors are involved in determining which returns are selected for audit.

(3) If you fail to claim a legitimate deduction or credit you have, in effect, audited your own return and disallowed the deduction – neither of which the IRS may actually do.

(4) Just because you read somewhere that an item is an IRS “red flag” does not mean that the item is really an IRS “red flag”.

I must add that if the alleged “red flag” deduction or credit is legitimate and documented, but another item on your return is not, an IRS audit might turn up the “questionable” item. The answer is obviously to claim only items that are legitimate on your tax return, and be sure to have sufficient documentation for all deductions and credits you claim. 

FYI - in my 45+ years in “the business” I expect I have prepared over 10,000 sets of tax returns.  I can count on the fingers of my two hands the number of traditional IRS office audits I have had to deal with over the years – none of which have been in the past 20+.  And many of the 10,000+ returns have included deductions and credits which are thought to be “red flag” items. 


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