Common Filing Mistakes That Trigger IRS Audits
For most Denver business owners, receiving a letter from the IRS is enough to cause a sleepless night. While the word "audit" sounds terrifying, the truth is that many IRS Audits are triggered by simple, avoidable mistakes on a tax return. The IRS uses sophisticated software to flag returns that look "outside the norm," and once you're on their radar, it can take months of stress and paperwork to clear your name.
At Thomas J McAlister, P.C., we’ve spent years helping clients navigate tax season with precision. In this guide, we’re breaking down the most common filing errors that attract unwanted government attention and how you can protect your business.
1. Mathematical Errors and Mismatched Income
The easiest way to get flagged for IRS Audits is through simple "fat-finger" errors. If the numbers you report don't match the forms the IRS already has on file (like 1099s or W-2s), their computer system will automatically flag the discrepancy.
The Fix: Double-check every entry. If you received a 1099 for $\$5,000$ but accidentally typed $\$500$, the IRS will notice immediately.
Pro Tip: Using professional accounting services ensures that your digital records and your tax filings are perfectly synced.
2. Abuse of the Home Office Deduction
The home office deduction is a legitimate way to save money, but it is one of the most frequent triggers for IRS Audits. The IRS is very strict about the "exclusive and regular use" rule.
The Mistake: Claiming your entire living room as an office when you also use it to watch movies with the family.
The Reality: The space must be used only for business. If you claim an unusually high percentage of your home's square footage for business, the IRS might take a closer look.
3. Excessive Meal and Travel Expenses
We all want to maximize our write-offs, but claiming 100% of your meals or high-end travel as a "business expense" without proper proof is a red flag. The IRS knows what average expenses look like for your specific industry. If your travel costs are significantly higher than your peers, you are inviting an audit.
Keep Your Receipts: You must be able to prove who you met with and what business was discussed.
The "Power Professor" Strategy: Just as a Power Professor masters a subject through deep research and precision, you should master your record-keeping to ensure every expense is bulletproof.
4. Not Reporting All Income Sources
In the modern "gig economy," it’s common to have multiple streams of income. However, if you forget to report that side hustle or a small investment gain, the IRS will find out. They receive copies of almost every financial document you do.
The Danger: Unreported income is viewed as tax evasion. Even if it was an honest mistake, it can lead to heavy penalties and an intensive audit of your entire financial history.
5. Classifying Employees as Independent Contractors
This is a major focus for the IRS and the State of Colorado right now. Misclassifying workers to avoid paying payroll taxes or benefits is a high-risk move.
The Test: Does the worker use their own tools? Do they set their own hours? If you have too much control over how and when they work, the IRS will likely argue they are an employee.
The Cost: If you lose an audit on this issue, you could be liable for back taxes, unpaid insurance, and massive fines.
How to Protect Your Business
The best defense against IRS Audits is a strong offense. This means having clean books, honest filings, and a professional team in your corner. If you do receive an audit notice, don't panic—and don't handle it alone.
At Thomas J McAlister, P.C., we provide specialized tax litigation and audit support to help Denver residents and businesses resolve disputes with the IRS quickly and fairly.
Conclusion: Accuracy is Your Best Friend
While you can never 100% guarantee you won't be audited, you can significantly lower your risk by avoiding these common mistakes. Filing a clean, accurate return is the best way to keep the IRS away from your door.
Worried about your past filings or facing an IRS notice?
Don’t wait! Contact Thomas J McAlister, P.C. today for a confidential consultation. Our team of experts will review your situation and help you stay on the right side of the tax laws.
