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8 IRS Audit Red Flags

June 15, 2022 · Updated February 20, 2023 · Personal Finance
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Photo by pikselstock from Shutterstock

7. Running A Self-Employed Business

Schedule C is a business income tax form for self-employed people. For some of these people, this tax form may be a treasure trove. But IRS agents know from experience that sole proprietors sometimes tend to claim extra deductions while not reporting all their income. The IRS analyzes both top-grossing sole traderships and smaller ones.

Here’s a list of the most common situations that could trigger an IRS Audit:

  • Self-employed people who declare at least $100,000 of the company’s gross sales on Schedule C
  • Cash-intensive businesses (retail stores, restaurants, cigarette distributors and the like)
  • Sole traders who have income from other sources but still report a substantial loss.
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