{"id":553,"date":"2026-07-03T00:57:11","date_gmt":"2026-07-03T00:57:11","guid":{"rendered":"https:\/\/blog.suryapadhiea.com\/blog\/?p=553"},"modified":"2026-07-03T01:03:59","modified_gmt":"2026-07-03T01:03:59","slug":"7-irs-red-flags-that-could-increase-your-chances-of-an-audit-in-2026","status":"publish","type":"post","link":"https:\/\/blog.suryapadhiea.com\/blog\/individual\/7-irs-red-flags-that-could-increase-your-chances-of-an-audit-in-2026\/","title":{"rendered":"7 IRS Red Flags That Could Increase Your Chances of an Audit in 2026"},"content":{"rendered":"\n<p><strong>By Surya Padhi, EA, CAA | Sure Financial &amp; Tax Services<\/strong><\/p>\n\n\n\n<p>Every year, millions of Americans file their tax returns accurately and never hear from the IRS again. However, certain mistakes, omissions, or unusual reporting patterns can increase the likelihood of receiving an IRS notice or having your return selected for further review.<\/p>\n\n\n\n<p>While the overall IRS audit rate remains relatively low\u2014around <strong>0.4% for individual returns<\/strong>\u2014certain reporting errors can significantly increase your chances of attracting IRS attention.<\/p>\n\n\n\n<p>The good news? Most IRS notices and audits are preventable with accurate recordkeeping and careful tax preparation.<\/p>\n\n\n\n<p>In this guide, we&#8217;ll discuss seven common IRS red flags and how you can avoid them when filing your 2026 tax return.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">1. Missing 1099 Income<\/h1>\n\n\n\n<p>One of the most common reasons taxpayers receive IRS notices is failing to report all taxable income.<\/p>\n\n\n\n<p>Financial institutions, employers, brokerage firms, and payment processors send copies of Forms 1099 directly to the IRS. The IRS uses automated matching systems to compare these forms against your tax return.<\/p>\n\n\n\n<p>Common forms include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Form 1099-NEC<\/li>\n\n\n\n<li>Form 1099-MISC<\/li>\n\n\n\n<li>Form 1099-K<\/li>\n\n\n\n<li>Form 1099-INT<\/li>\n\n\n\n<li>Form 1099-DIV<\/li>\n\n\n\n<li>Form 1099-B<\/li>\n\n\n\n<li>Form SSA-1099<\/li>\n\n\n\n<li>Form 1099-R<\/li>\n<\/ul>\n\n\n\n<p>If even one form is omitted, the IRS may issue a <strong>CP2000 notice<\/strong> proposing additional tax.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">How to Avoid This Red Flag<\/h3>\n\n\n\n<p>\u2714 Wait until you&#8217;ve received all tax documents before filing.<\/p>\n\n\n\n<p>\u2714 Review your IRS Wage and Income Transcript if you&#8217;re unsure whether you&#8217;ve received every form.<\/p>\n\n\n\n<p>\u2714 Double-check brokerage and online payment platform statements.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">2. Unusually Large Charitable Contributions<\/h1>\n\n\n\n<p>Charitable donations are valuable tax deductions\u2014but unusually large deductions compared to your income may attract additional scrutiny.<\/p>\n\n\n\n<p>For cash contributions:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Donations generally cannot exceed IRS percentage limitations based on Adjusted Gross Income (AGI).<\/li>\n\n\n\n<li>Contributions of <strong>$250 or more<\/strong> require a contemporaneous written acknowledgment from the charitable organization.<\/li>\n<\/ul>\n\n\n\n<p>Non-cash donations may also require qualified appraisals and additional documentation depending on value.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Best Practice<\/h3>\n\n\n\n<p>Maintain:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Donation receipts<\/li>\n\n\n\n<li>Bank records<\/li>\n\n\n\n<li>Acknowledgment letters<\/li>\n\n\n\n<li>Appraisals (when required)<\/li>\n<\/ul>\n\n\n\n<p>Proper documentation is your best defense if the IRS requests support.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">3. Missing Required Minimum Distributions (RMDs)<\/h1>\n\n\n\n<p>Many retirees are required to begin taking <strong>Required Minimum Distributions (RMDs)<\/strong> from certain retirement accounts beginning at the applicable IRS age.<\/p>\n\n\n\n<p>The IRS receives annual reporting from financial institutions regarding retirement account balances and distributions.<\/p>\n\n\n\n<p>Failing to take an RMD may result in penalties unless corrected promptly.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Retirement Accounts Subject to RMD Rules<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Traditional IRA<\/li>\n\n\n\n<li>SEP IRA<\/li>\n\n\n\n<li>SIMPLE IRA<\/li>\n\n\n\n<li>Traditional 401(k)<\/li>\n\n\n\n<li>403(b)<\/li>\n<\/ul>\n\n\n\n<p>Roth IRAs generally do not require lifetime RMDs for the original owner.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Tax Planning Tip<\/h3>\n\n\n\n<p>Review your retirement accounts each year to ensure required distributions are taken before the IRS deadline.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">4. Incorrect Cost Basis Reporting<\/h1>\n\n\n\n<p>Selling investments without accurately reporting cost basis is another common trigger for IRS correspondence.<\/p>\n\n\n\n<p>Brokerage firms report stock sales on <strong>Form 1099-B<\/strong>, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Purchase price (when available)<\/li>\n\n\n\n<li>Sales price<\/li>\n\n\n\n<li>Gain or loss<\/li>\n<\/ul>\n\n\n\n<p>If your reported gain differs significantly from IRS records, the IRS may request clarification.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Keep Records Of<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Purchase confirmations<\/li>\n\n\n\n<li>Dividend reinvestments<\/li>\n\n\n\n<li>Stock splits<\/li>\n\n\n\n<li>Corporate actions<\/li>\n\n\n\n<li>Inherited asset basis adjustments<\/li>\n<\/ul>\n\n\n\n<p>Good recordkeeping helps ensure capital gains are calculated correctly.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">5. Claiming Gambling Losses Improperly<\/h1>\n\n\n\n<p>Gambling winnings are generally taxable and must be reported as income.<\/p>\n\n\n\n<p>While gambling losses may be deductible under certain circumstances, they are subject to IRS limitations and documentation requirements.<\/p>\n\n\n\n<p>You should maintain:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Win\/loss statements<\/li>\n\n\n\n<li>Casino records<\/li>\n\n\n\n<li>Betting slips<\/li>\n\n\n\n<li>Bank statements<\/li>\n\n\n\n<li>Gambling diary<\/li>\n<\/ul>\n\n\n\n<p>Without proper documentation, the IRS may disallow claimed losses.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">6. Excessive Round Numbers<\/h1>\n\n\n\n<p>Tax returns filled with perfectly rounded numbers may raise questions because they can suggest estimates rather than actual records.<\/p>\n\n\n\n<p>Examples include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>$5,000 Office Expenses<\/li>\n\n\n\n<li>$10,000 Advertising<\/li>\n\n\n\n<li>$15,000 Travel<\/li>\n\n\n\n<li>$20,000 Supplies<\/li>\n<\/ul>\n\n\n\n<p>While rounded amounts aren&#8217;t prohibited, repeated estimates across multiple categories may increase scrutiny.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Best Practice<\/h3>\n\n\n\n<p>Maintain detailed bookkeeping and report actual expenses whenever possible.<\/p>\n\n\n\n<p>Accounting software can help ensure greater accuracy.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">7. Reporting Business Losses Year After Year<\/h1>\n\n\n\n<p>Many small businesses experience losses during startup years. However, reporting continuous losses over an extended period may cause the IRS to question whether the activity is truly operated for profit.<\/p>\n\n\n\n<p>The IRS may classify an activity as a hobby if it lacks a genuine profit motive.<\/p>\n\n\n\n<p>When this happens:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Business deductions may be limited.<\/li>\n\n\n\n<li>Losses may be disallowed.<\/li>\n\n\n\n<li>Additional tax may be assessed.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Demonstrating a Profit Motive<\/h3>\n\n\n\n<p>Maintain:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Business plans<\/li>\n\n\n\n<li>Marketing efforts<\/li>\n\n\n\n<li>Separate business bank accounts<\/li>\n\n\n\n<li>Financial statements<\/li>\n\n\n\n<li>Profit improvement strategies<\/li>\n<\/ul>\n\n\n\n<p>Showing that you actively manage your business like a business\u2014not a hobby\u2014helps support your deductions.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Additional IRS Audit Triggers to Watch For<\/h1>\n\n\n\n<p>Besides the seven common red flags above, taxpayers should also pay close attention to:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Cryptocurrency Transactions<\/h3>\n\n\n\n<p>Digital asset transactions\u2014including sales, exchanges, staking rewards, and certain payments\u2014may create taxable events. Be sure to report all required cryptocurrency activity accurately.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Home Office Deductions<\/h3>\n\n\n\n<p>Home office deductions are available only when IRS requirements are met. Keep detailed records and ensure the space is used regularly and exclusively for business.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Large Cash Transactions<\/h3>\n\n\n\n<p>Businesses receiving significant cash payments may have additional reporting requirements under federal law.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Foreign Financial Accounts<\/h3>\n\n\n\n<p>U.S. taxpayers with foreign bank accounts or specified foreign financial assets may need to file additional information returns, such as FBAR or Form 8938.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Tips to Reduce Your Audit Risk<\/h1>\n\n\n\n<p>While no one can guarantee an audit-free return, these best practices can reduce your chances of receiving an IRS notice:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Report all income accurately.<\/li>\n\n\n\n<li>Keep organized records and receipts.<\/li>\n\n\n\n<li>File electronically when possible.<\/li>\n\n\n\n<li>Review your return for errors before filing.<\/li>\n\n\n\n<li>Respond promptly to IRS correspondence.<\/li>\n\n\n\n<li>Work with a qualified tax professional if your return is complex.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Why Professional Tax Preparation Matters<\/h1>\n\n\n\n<p>The IRS increasingly relies on sophisticated data matching systems to identify inconsistencies. Even honest mistakes can trigger notices or delays.<\/p>\n\n\n\n<p>Working with an experienced tax professional helps ensure:<\/p>\n\n\n\n<p>\u2714 Accurate income reporting<\/p>\n\n\n\n<p>\u2714 Proper deduction documentation<\/p>\n\n\n\n<p>\u2714 Retirement distribution compliance<\/p>\n\n\n\n<p>\u2714 Correct capital gains calculations<\/p>\n\n\n\n<p>\u2714 Tax-saving opportunities without unnecessary audit risk<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h1 class=\"wp-block-heading\">Schedule Your Tax Planning Consultation<\/h1>\n\n\n\n<p>Whether you&#8217;re filing an individual return, managing a business, or planning for retirement, proactive tax planning can help you reduce errors, maximize deductions, and stay compliant with IRS rules.<\/p>\n\n\n\n<p>At <strong>Sure Financial &amp; Tax Services<\/strong>, we help individuals, families, investors, and business owners prepare accurate tax returns while identifying strategies to legally minimize taxes.<\/p>\n\n\n\n<p>Our services include:<\/p>\n\n\n\n<p>\u2714 Individual Tax Preparation<\/p>\n\n\n\n<p>\u2714 Business Tax Returns<\/p>\n\n\n\n<p>\u2714 IRS Notice Assistance<\/p>\n\n\n\n<p>\u2714 Tax Planning &amp; Projections<\/p>\n\n\n\n<p>\u2714 Retirement Tax Planning<\/p>\n\n\n\n<p>\u2714 Capital Gains &amp; Investment Tax Planning<\/p>\n\n\n\n<p>\u2714 Small Business Tax Consulting<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Contact Us Today<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Surya Padhi, EA, CAA<\/strong><\/h3>\n\n\n\n<p><strong>Enrolled Agent | Certified Acceptance Agent<\/strong><\/p>\n\n\n\n<p><strong>Sure Financial &amp; Tax Services<\/strong><\/p>\n\n\n\n<p>\ud83d\udcde <strong>Phone:<\/strong> 908-955-0696<\/p>\n\n\n\n<p>\ud83d\udce7 <strong>Email:<\/strong> <a href=\"mailto:contact@suryapadhiea.com\">contact@suryapadhiea.com<\/a><\/p>\n\n\n\n<p>\ud83c\udf10 <strong>Website:<\/strong> <a href=\"http:\/\/www.suryapadhiea.com\/\">www.suryapadhiea.com<\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Stay Compliant. Maximize Your Deductions. Minimize Your Tax Burden.<\/h3>\n\n\n\n<p>Schedule your consultation today and gain confidence that your tax return is accurate, complete, and optimized for your financial goals.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h3 class=\"wp-block-heading\">Disclaimer<\/h3>\n\n\n\n<p>This article is for informational purposes only and should not be considered legal, tax, or financial advice. IRS rules are subject to change, and every taxpayer&#8217;s situation is unique. Consult a qualified tax professional before making tax-related decisions.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Surya Padhi, EA, CAA | Sure Financial &amp; Tax Services Every year, millions of Americans file their tax returns accurately and never hear from the IRS again. However, certain mistakes, omissions, or unusual reporting patterns can increase the likelihood of receiving an IRS notice or having your return selected for further review. While the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":555,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21,14],"tags":[],"class_list":["post-553","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-21","category-individual"],"_links":{"self":[{"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/posts\/553","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/comments?post=553"}],"version-history":[{"count":1,"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/posts\/553\/revisions"}],"predecessor-version":[{"id":554,"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/posts\/553\/revisions\/554"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/media\/555"}],"wp:attachment":[{"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/media?parent=553"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/categories?post=553"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.suryapadhiea.com\/blog\/wp-json\/wp\/v2\/tags?post=553"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}