Audit “Red Flags”
Let me start by saying that no tax preparer has a crystal ball and knows exactly what triggers an audit. In fact, if you asked several experienced preparers what counted as an audit “red flag” you’d get several different replies, including a response or two about how red flags don’t exist.
So what’s the deal? Why are people so convinced that audit red flags exist?
There are parameters that the IRS uses in order to determine if a taxpayer will get a audit letter. But the audit decision is computerized–no one knows exactly what the computer selection is based on. Yes, there are certain items that do seem to come up for audit more often than others, but they are also items that people tend to overestimate or abuse. (In home office, for example, or a small business loss.)
If you have a preparer who is more concerned about an audit than about doing your taxes accurately, you should find a new preparer. A good tax preparer will make sure that you pay the lowest amount of taxes legally possible. If your preparer refuses to take legal deductions that you are entitled to, they are doing you a disservice by having you pay more in taxes than you legally should.