What Is a Red Flag to the IRS?

by Theon Weber ; Updated July 27, 2017
Most tax returns are processed by computers.

Your federal tax returns are usually processed by a computer at the IRS, and if all goes well, they may never be seen by a human. The computers are programmed, however, to look out for suspicious abnormalities -- errors in the return, statistical anomalies and discrepancies between different returns, among others. Such abnormalities don't necessarily mean you've broken the law, even mistakenly, but a computer coming across them will "flag" your return for review by a human. This is the first step toward an audit, an extremely stressful process you'd like to avoid. You can't ever guarantee you won't be audited, but if you're careful with your tax returns, you can avoid computer flagging.

Sloppy Returns

Errors on a return -- bad math, directions not followed or unrealistically round numbers -- make it impossible for IRS computers to process the return, so it's flagged and sent to a human. A few arithmetic errors won't get you audited, but lots might, and it's better not to be flagged at all. One way to ensure an accurate return is to e-file and let special tax software make the calculations for you.

Income Inconsistencies

Remember that for every 1099 or W-2 you get, an identical copy has been sent to the IRS. If you let income go unreported, you're in danger of an audit; similarly, if your income is unusually low given your profession, or has changed drastically since your last tax return, IRS flags will go up. Finally, even if you haven't made a mistake, if you have an income in excess of $100,000 a year, the chances of being audited rise sharply -- so make particularly sure you have nothing to worry about.

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Suspicious Deductions

If you have claimed a large number of itemized deductions, the IRS computer may flag you. Of course, there's nothing illegal about claiming lots of deductions, so don't leave out anything you're entitled to -- but make sure that every deduction you claim is legitimate, and be prepared for a little IRS scrutiny. Charitable contributions may raise a flag if they are very large or numerous.

State and Federal

Discrepancies between your state and federal returns will cause IRS computers to raise a flag. A with math errors, they'll need a human to work it out anyway. Make sure your state and federal returns agree with each other. E-filing can help in this department, too, as many e-filing options let you file your state and federal returns simultaneously.

About the Author

Theon Weber has been a professional writer and critic since 2006, writing for the Village Voice, the Portland Mercury, and the late Blender Magazine. He was a staff writer at the Web-based Stylus Magazine from 2005 to its closure in 2007.

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