48.1 Odds of Being Audited

The odds are low that your return will be picked for an audit. However, the number has been increasing, particularly with respect to high-income taxpayers.

Audit odds vary depending on your income, profession, type of return, type of transactions reported, and where you live. Individual returns are classified by all income items on the return without regard to losses. Professional or business income reported on Schedule C and farm income reported on Schedule F is classified by total gross receipts, and corporate returns are classified by total assets.

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image Caution
IRS Increasing Audits
In recent years, the IRS has increased audits of high-income taxpayers, Schedule C filers, S corporations, partnerships, corporations, and abusive tax shelters.
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Your return may command special IRS scrutiny because of your profession, the type of transactions reported, or the deductions claimed. The chances of being audited are greater under the following circumstances:

  • Your information reported on the tax return does not match information received from third-party documentation, such as Forms 1099 and W-2.
  • Your itemized deductions exceed IRS targets.
  • You claim tax-shelter losses.
  • You report complex investment or business transactions without clear explanations.
  • You receive cash payments in your work that the IRS thinks are easy ...

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