The IRS has been sharpening its tools. While the agency has faced recent budget fluctuations, it is leaning more heavily on advanced data analytics and AI to flag returns that look out of place.
This means that even if you aren’t a millionaire, a few simple slip-ups can move your return from the “processed” pile to the “under review” stack.
Avoiding an audit isn’t just about being honest — it is about being precise. The IRS compares your return to statistical norms for people in your income bracket. If you fall outside those lines, the system starts asking questions.
Here are some common mistakes that could bring an auditor to your door, even if you thought you were doing everything right.
1. Mismatching your W-2 and 1099 forms
One of the most frequent reasons for a letter from the IRS is also the simplest: The numbers on your return do not match the numbers sent to the government by your employer or bank. The IRS Automated Underreporter Program processed more than a million cases in the 2024 fiscal year alone.
Every time a company sends you a tax form, such as a W-2 from your employer or a 1099-INT from your bank, they send a copy of it to the IRS. If you forget to report a small dividend or a side hustle payment, the agency’s computers will flag the discrepancy immediately.
2. Claiming 100% business use of a vehicle
It is rare for a car to be used exclusively for work, and the IRS is well aware of this reality. If you claim that your primary vehicle is used 100% for business, the agency may suspect you are trying to write off personal commuting or grocery runs.
Unless you have a specialized vehicle, like a delivery truck that stays at a job site, claiming total business use is a red flag. You are better off keeping a detailed mileage log that clearly separates your professional trips from your personal errands.
3. Reporting consecutive business losses
A business is generally expected to turn a profit. If you file a Schedule C and report a loss year after year, the IRS may decide your business is actually a hobby.
Consistently claiming losses allows you to use those business expenses to offset other taxable income. If the IRS reclassifies your activity as a hobby, you may lose those offsets entirely and be hit with a bill for back taxes and interest.
4. Failing to report digital asset activity
The days of cryptocurrency being the Wild West for taxes are over. The IRS now asks a direct question on the front of Form 1040 about digital assets. Starting in 2026, new reporting rules for brokers mean the IRS will receive even more data on your crypto trades.
If you sold, exchanged, or even used digital currency to buy a cup of coffee, you must report it. Failing to check that box or underreporting gains is a high-priority enforcement area for the agency.
5. Taking unusually large charitable deductions
Giving back is great for your community and your tax bill, but the IRS monitors the ratio of donations to income. If you earn $50,000 and claim $20,000 in charitable donations, your return stands to be flagged for further review.
This doesn’t mean you shouldn’t claim what you gave. It simply means you must have the paperwork to prove it. For any donation over $250, you need a written acknowledgment from the charity, and for large non-cash gifts, you may even need an independent appraisal.
6. Claiming the home office deduction incorrectly
The home office deduction is a legitimate way to save, but it has strict rules. To qualify, your space must be used regularly and exclusively for business. If your home office also serves as a guest room or a playroom for your kids, it doesn’t meet the criteria.
The IRS has been known to scrutinize this deduction because it is frequently abused. If you decide to take it, ensure the area is a clearly defined, dedicated workspace and keep photos or a floor plan to document your claim.
7. Forgetting to sign and date your return
It sounds elementary, but thousands of taxpayers trigger delays or manual reviews by simply forgetting to sign their forms. While most e-file software catches this, paper filers or those with complex schedules often miss a signature line.
An unsigned return is technically not a valid return. This error slows down your refund and can occasionally lead to the IRS taking a closer look at the rest of your documentation to ensure other details weren’t also rushed or overlooked.
Stay prepared for a smooth tax season
The best way to handle an audit is to prevent one from happening in the first place. By double-checking your math, reporting every dollar of income, and keeping receipts for every deduction, you significantly lower your risk.
If you do receive a letter from the IRS, don’t panic. Many audits are conducted entirely through the mail and can be resolved by simply providing the documentation you already have on hand. Staying organized throughout the year is your best defense against the stress of federal oversight.