IRS Red Flags: 7 Mistakes That Will Get You Audited in 2024

🚨 IRS Red Flags: 7 Mistakes That Will Get You Audited in 2024

Let’s be real — no one wants to hear from the IRS.

An audit can be time-consuming, expensive, and downright stressful. But here’s the truth: most audits are triggered by avoidable mistakes.

So if you want to stay off the IRS radar this year, read this list and keep these 7 red flags in check.

🚩 1. High Deductions Compared to Your Income

If you're claiming $50,000 in deductions on $60,000 of income, that’s a red flag.

The IRS uses computer algorithms (hello, AI 👋) to spot returns that seem out of balance. Even if your expenses are legit, a deduction-heavy return increases your audit risk.

✅ Pro Tip: Be ready to prove every deduction with clear records — and make sure they’re actually “ordinary and necessary” for your business.

🚩 2. Too Many Years of Business Losses

Claiming a business loss once or twice? No big deal.

But losing money year after year (especially while still claiming business deductions) can make the IRS think you’re running a hobby — not a legit business.

And hobby expenses? Not deductible.

✅ Pro Tip: Show a profit at least 3 out of every 5 years. And keep documentation that proves you're actively trying to run a real business.

🚩 3. Excessive Vehicle Write-Offs

Yes, you can deduct business mileage or actual expenses for a vehicle used in your business. But claiming 100% business use? That’s a red flag — especially if it’s your only car.

✅ Pro Tip: Use an app (like MileIQ or Everlance) to track your business mileage. Keep a log. The IRS will ask for it.

🚩 4. Writing Off Lavish Vacations as Business Trips

We’ve all seen the TikToks: “Turn your vacation into a tax deduction!”

Sure — if you’re traveling primarily for business, you can deduct flights, hotels, and meals for the business portion. But don’t push it.

A luxury week in Bali with no client meetings or clear purpose? That’s not a business trip. That’s bait for an audit.

✅ Pro Tip: Keep an itinerary, receipts, and documentation showing the business purpose of your travel.

🚩 5. Overusing the Home Office Deduction

The home office deduction is real — and powerful. But it has rules.

You must use part of your home:

• Exclusively for business

• On a regular basis

No, your kitchen table doesn’t count. Neither does your couch.

✅ Pro Tip: Take photos of your workspace and measure square footage. You’ll need this info to back up your deduction.

🚩 6. Not Reporting Side Income (Cash, Venmo, PayPal)

The IRS is watching those apps now.

If you're getting paid through PayPal, Venmo, Zelle, Cash App, or in straight-up cash — it's taxable. And starting in 2024, payment processors will be reporting more transactions via 1099-K forms.

✅ Pro Tip: Report all your income, even if you didn’t receive a form. The IRS gets copies — and they’ll notice if you leave something out.

🚩 7. Poor Recordkeeping (This One Gets People Every Year)

Even if your deductions are 100% legit, you can still lose an audit if you don’t have documentation.

That includes:

• Receipts

• Mileage logs

• Invoices

• Bank statements

No records = no deduction in the eyes of the IRS.

✅ Pro Tip: Go digital. Use accounting software or a simple cloud folder to organize and store your records all year long.

✅ Want to Stay Audit-Proof?

We made something just for you.

📥 Download Our Free IRS Audit Defense Checklist » Make sure you’ve got what the IRS wants to see — before they ever ask.

Questions about your return? Need help getting organized or proactive with your taxes?

Let’s talk. Philly Tax Team specializes in audit-proof tax planning for small business owners and real estate investors. Book a strategy call today »