Common IRS audit triggers include underreporting income, taking excessive or unsubstantiated business deductions (especially on Schedule C), using the home office deduction, claiming large charitable donations, and having high income ($200,000+ or over $10 million). Other triggers include operating cash-intensive businesses, cryptocurrency transactions, and math errors.
Not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.
Unreported income
The IRS receives copies of your W-2s and 1099s, and their systems automatically compare this data to the amounts you report on your tax return. A discrepancy, such as a 1099 that isn't reported on your return, could trigger further review.
Here are 7 common audit triggers and how you can sidestep them with smart financial practices—and a trusted CPA by your side.
Late filings are one thing, complete failure is another. A failure to report your payroll taxes is just about the biggest red flag of all for the IRS. Not reporting your own personal income is also another warning sign. The IRS wants to ensure that you aren't withholding income in your calculations.
Let's explore the IRS audit triggers to keep you in the clear.
The four key components of audit risk, as defined by the Audit Risk Model, are Inherent Risk, Control Risk, Detection Risk, and Acceptable Audit Risk (or Overall Audit Risk), representing the susceptibility of accounts to misstatement, failures in internal controls, the auditor's chance of missing errors, and the acceptable level of risk for the audit, respectively, all combining to determine if a materially misstated financial statement receives an inappropriate opinion.
Correspondence audits are the most common IRS audit types. The Internal Revenue Service conducts this audit to request additional documentation from taxpayers.
Here's a list of seven symptoms that call for attention.
Lying about income or falsifying records crosses the line into evasion. Some of the most common forms include underreporting income, especially cash earnings, or failing to file returns altogether. Others include claiming fake deductions, concealing assets, or moving money offshore without disclosure.
The Unreported Income DIF (UIDIF) score rates the return for the potential of unreported income. IRS personnel screen the highest-scoring returns, selecting some for audit and identifying the items on these returns that are most likely to need review.
The 5 Cs of audit (Criteria, Condition, Cause, Consequence, Corrective Action) are a framework for structuring clear, actionable audit findings, explaining what should be (Criteria), what is found (Condition), why it happened (Cause), what the impact is (Consequence/Effect), and how to fix it (Corrective Action/Recommendation) to drive organizational improvement and compliance.
Below are the types of audit risks:
There are five potential threats to auditor independence: self-interest, self-review, advocacy, familiarity, and intimidation. Any lack of independence compromises the integrity of financial markets.
The IRS tries to audit tax returns as soon as possible after they are filed. Accordingly, most audits will be of returns filed within the last two years. If an audit is not resolved, we may request extending the statute of limitations for assessment tax.
Inconsistent or inaccurate financial reporting is one of the most frequent reasons for an audit.
That being said, it's important to be aware of “triggers” for IRS audits, below is a list of some of the more egregious items.
Here's a summary of key changes for the 2025 tax year.