Few phrases can cause as much stress for taxpayers as “IRS audit.” Whether you’re an individual, small business owner, or investor, the prospect of having your returns scrutinized by the Internal Revenue Service is enough to make anyone nervous. The good news is that most taxpayers will never face an audit. In fact, according to IRS data, fewer than 1% of individual returns are examined each year.

Still, the IRS doesn’t select returns at random. Certain red flags make it more likely you’ll be subject to additional scrutiny. By understanding the most common triggers, you can take proactive steps to minimize your risk.

Common IRS Audit Triggers

1. High Income

Statistically, the more money you make, the higher your chance of being audited. High earners are more likely to have complex returns with investment income, business deductions, and multiple schedules, all of which invite closer examination.

2. Large or Unusual Deductions

Claiming deductions that are disproportionately high compared to your income can catch the IRS’s attention. For example, if you report $70,000 in income but claim $40,000 in charitable deductions, expect additional scrutiny. The same is true for unusually high medical expenses, home office deductions, or miscellaneous write-offs.

3. Business Losses Year After Year

The IRS is particularly wary of hobby losses—activities that consistently lose money but may provide personal enjoyment. If you report business losses multiple years in a row, you may have to prove you are running a legitimate business with a profit motive.

4. Cash-Intensive Businesses

If you operate a restaurant, salon, car wash, or other business where cash is common, the IRS may be more inclined to double-check that all income is reported.

5. Mismatched or Missing Information

One of the simplest ways to trigger an audit is a mismatch between the forms the IRS receives (W-2s, 1099s) and what you report on your return. Always make sure the information you enter matches what your employer, clients, or brokerage firms submit.

6. Cryptocurrency Transactions

The IRS has increased its focus on digital assets. If you sold, traded, or were paid in cryptocurrency, make sure you report those transactions accurately, as missing them is an audit red flag.

How to Reduce Your Risk

Keep Detailed Records

Good record-keeping is your best defense. Save receipts, invoices, mileage logs, and any other documentation supporting your income and deductions. If you’re ever audited, this paper trail will help substantiate your claims.

File Accurate and Timely Returns

Mistakes, math errors, and missed deadlines can all draw unwanted attention. Double-check your work or hire a qualified tax professional to ensure everything is accurate.

Be Conservative, Not Aggressive

Take every deduction you are legally entitled to—but don’t push beyond what the law allows. Overstating deductions or underreporting income can quickly backfire.

Work with Professionals

Tax professionals can help you plan throughout the year, not just at filing time. Partnering with experienced advisors like Expand CPA tax experts can help ensure your return is accurate, optimized, and less likely to trigger IRS scrutiny.

When an Audit Happens

Even if you do everything right, an audit can still happen. The IRS conducts different types of audits—some by mail and others in person. Respond promptly, be organized, and consider having a tax professional represent you. The goal is to resolve the audit efficiently and minimize any potential penalties.

Final Thoughts

An IRS audit may sound intimidating, but it is far from inevitable. Most taxpayers will never face one, and those who do can often resolve it smoothly with good documentation. By understanding what triggers an audit—such as unusually high deductions, mismatched income reports, or multiple years of losses—you can proactively reduce your risk.

Ultimately, the best strategy is simple: be accurate, keep good records, and seek professional advice when needed. Doing so will not only give you peace of mind but also allow you to focus on growing your wealth and business without the looming fear of an audit.