Should I need to worry about being audited by the IRS, or do they only audit when certain red flags appear?

Answer 1

You never have to "worry" about being audited by the IRS if you don't lie on your taxes. If someone else does your taxes, make sure that they are honest and that they sign your return under the "paid preparer" line. If you send in a honest return, even if you are audited, the auditor won't find anything, so why worry? If you know of a mistake, made in the last 3 years, then amend your return as soon as possible. If you find the mistake (as opposed to the IRS finding it), they will be more lenient on you. If you make an honest mistake, don't fret. The IRS will work with you on making payments if you end up owing. Finally, if you are intentionally fraudulent, then you should worry about it every night because if / when the IRS catches you, not only will you owe back the money, you may also pay penalties and possibly jail time (remember Chicago mob boss Al Capone).

Answer 2

In addition to audits triggered by 'Red Flags', the IRS audits a certain number of returns each year to help determine what the 'red flags' should be. If you are subject to one of these audits, you really have nothing to worry about. They don't suspect you of anything. If you are being audited because of a 'red flag', they fill tell you which items on your return raised the flags.

Answer 3

Your chances of being audited by the IRS are greater under the following circumstances:
You claim Head of Household as a filing status
You have large amounts of itemized deductions on your tax return that exceed IRS targets.
You claim tax shelter investment losses on your tax return.
You have complex investment or business expenses on your tax return.
You own or work in a business which receives cash and/or tips in the ordinary course of business.
Your business expenses are large in relation to your income on your tax return.
You have rental expenses on your tax return.
A prior IRS audit resulted in a tax deficiency.
You have complex tax transactions without explanations on your tax return.
You are a shareholder or partner in an audited partnership or corporation.
You claim large cash contributions to charities in relation to your income on your tax return.
An informant has given information to the IRS.

Answer 4

Audits are done completely at random as well as to anyone who will raise certain red flags, like you say. . . .Better to be safe than sorry when it comes to things like that.