Your chances of being audited by the Internal Revenue Service are going up, but only slightly. It is helpful to look at a historical perspective to have a better understanding. For example, in 2001 the IRS audited 732,000 individual returns compared to only 618,000 in 2000. In addition to the regular increase in 2002, the IRS was mandated to randomly audit at least 50,000 extra returns. While those numbers seem high, your risk of being audited remains relatively low considering that approximately 135 million individual returns will be filed this year.
It should be noted that there are certain “triggers” that can spark the IRS to take a second look, or at least request additional information, about your tax return. These “triggers” can range from simple mathematical mistakes on your return to certain deductions that you claim. According to the IRS, the most common “triggers” are:
- sudden spikes (drops or increases) in income
- missing forms or undocumented income
- an unsigned return
- missing Social Security numbers for the taxpayer or dependents
- filing a Schedule C – self-employed taxpayers are three times more likely than wage earners to be audited
- deductions that exceed the norm for your income
- taking the home office deduction, and/or
- casualty losses to your home
None of these “triggers” should keep you from filing an accurate tax return. However, if you are claiming such, you should make sure that you have complete and documented information to back up your claim.