While the IRS randomly selects returns for audit review, the agency will often flag returns because of suspicious information or deductions. Help reduce your shop’s chance of being audit, avoid these three common IRS red flags:
• Incomplete or inaccurate income reports
• Unusual or above-average deductions
• Business losses, especially tax losses.
If you decide to make legitimate deductions for business losses, keep all supporting documentation. To be extra safe, attach copies of the documentation to your return.