TaxFlow - Year-Round Tax Automation

While the overall audit rate is low, certain patterns dramatically increase your chances of being selected. Understanding these red flags helps you stay compliant and audit-ready.

1. Unusually High Deductions Deductions that are significantly higher than average for your income level can trigger a review. Always have documentation for every deduction.

2. Home Office Deduction Abuse The home office deduction is one of the most scrutinized. The space must be used regularly and exclusively for business — a guest room that doubles as an office does not qualify.

3. Large Cash Transactions The IRS requires reporting of cash transactions over $10,000. Patterns of cash deposits just under this threshold (structuring) are also flagged.

4. Claiming 100% Business Use of a Vehicle Very few people use a vehicle exclusively for business. Claiming 100% business use without a mileage log is a major red flag.

5. Consistently Reporting Business Losses Reporting losses for multiple consecutive years suggests the activity may be a hobby, not a business. The IRS generally allows losses for 3 of 5 years.

How TaxFlow Helps TaxFlow's Audit Defense hub continuously monitors your return for these and other red flags, providing an audit risk score and recommendations to reduce your exposure.

10 IRS Audit Red Flags to Avoid in 2025

1. Unusually High Deductions Deductions that are significantly higher than average for your income level can trigger a review. Always have documentation for every deduction.

2. Home Office Deduction Abuse The home office deduction is one of the most scrutinized. The space must be used regularly and exclusively for business — a guest room that doubles as an office does not qualify.

3. Large Cash Transactions The IRS requires reporting of cash transactions over $10,000. Patterns of cash deposits just under this threshold (structuring) are also flagged.

4. Claiming 100% Business Use of a Vehicle Very few people use a vehicle exclusively for business. Claiming 100% business use without a mileage log is a major red flag.

5. Consistently Reporting Business Losses Reporting losses for multiple consecutive years suggests the activity may be a hobby, not a business. The IRS generally allows losses for 3 of 5 years.

How TaxFlow Helps TaxFlow's Audit Defense hub continuously monitors your return for these and other red flags, providing an audit risk score and recommendations to reduce your exposure.