The odds of being singled out by the Internal Revenue Service are very low, but certain types of deductions, even very common ones, can raise red flags with tax collectors and possibly trigger an audit.
To minimize the chance of getting an audit request from the IRS, tax experts say take care with certain deductions and keep good paperwork to back up claims.
Joy Taylor, assistant editor for The Kiplinger Tax Letter, said 0.96 percent of individual tax returns last year were audited, the first time in seven years that the overall individual audit rate slipped under 1 percent. The IRS has fewer resources and lower budgets than before, she said, which is why there were fewer overall audits.
However, that doesn't mean the IRS is less zealous about audits. Instead, Taylor said, "They're more hyperfocused, doing what will get them the most bang for the buck."
One of the biggest red flags the IRS looks for is outsize charitable donations relative to income. Taylor and Leif Novie, principal at Morrison Brown Argiz & Farra LLC, both said the IRS charts average deductions based on a person's income, so if donations appear excessive, it may raise eyebrows.
The IRS may ask for proof of such donations; Taylor and Novie said charities will give receipts. Noncash donations of more than $5,000 without an appraisal of the item's value will invite closer examination.
Novie said one of the common deductions for self-employed individuals that can trigger an audit is for a home office.
"Lots of individuals are under the misconception that they can deduct their home office even if they have another office to work in. The rule is you can only deduct a home office if you don't have another office available to you," he said.
It has to be an area that's devoted exclusively and regularly to business, Taylor said. "If you have an office in the home, but it's also used as a rec room, that won't count."
An offshoot of the home-based business deduction is one for a work vehicle, she said. Trying to claim that an auto's use is all business is risky.
"Many people might own two vehicles and write one off 100 percent for business use. But you may be also dropping the kids off at school in the same car, taking them to practice, running personal errands in that car. There's a lot of fudging (by people) with business vehicles," she said.
Another mistake that will lead to IRS questions, but not necessarily an audit, is failure to file all necessary documents. Some investment firms that issue more complex tax forms may send them late, so taxpayers with complicated investments may need to wait before filing. That could result in the need to file for an extension.