Each year we read tax tips about how to legally pay less in taxes. But another thing to stay informed about if you want to avoid trouble with the IRS is red flags or warning signs that might potentially trigger closer looks from the tax authority and even an IRS audit. Here are some ways you can help ensure that you stay beneath the IRS radar.

  • Don’t be a Loser

The IRS expects that during difficult economic times many people with file negative returns or returns that show that they either broke even on the year or lost money, instead of making money. But if you remain in that status year after year, the IRS will start to get suspicious that you are just saying you lost money in order to avoid paying taxes on your earned income.

  • Don’t Take Ridiculous Deductions

Maybe you gave to charity last year, or maybe you had some business expenses. You might have done some travel for your business or taken some extra continuing education classes and the tuition will qualify as a tax deduction. That’s great, and you deserve deductions. But when you start filing deductions that are preposterous – like saying you gave $30,000 to charity but you only made a gross income of $50,000 – then the IRS is probably going to take a closer look at your accounts.

  • Don’t Forget Your Marriage or Divorce

There can be tax advantages for filing as a single person, and in other situations it can be financially beneficial to file as a married person. But you need to file based on your actual marital status according to the rules and guidelines of the IRS. If you conveniently forget whether you are married, single, or divorced just to save some money on your taxes, the IRS will probably notice and give you a rude reminder.

Another red flag is to fail to acknowledge income that you have. The IRS will see your income information because it will be sent to them by banks, brokerage firms, employees, and others who paid you. So just because you don’t mention it does not mean that the IRS does not know you earned it and owe taxes on it.

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