Every year, the IRS audits a small percentage of tax returns, but with advances in data analytics and a growing emphasis on uncovering hidden revenue, even everyday taxpayers may find themselves under scrutiny.
Most people are aware of common red flags like failing to report income or claiming excessive deductions — but what about the lesser-known triggers? Below, we break down the 2025 common IRS audit triggers you haven’t heard of — and how to avoid them staying on the safe side this tax season.
1. Excessive Meals and Entertainment Deductions
Trigger: The IRS knows the average ranges for industry-specific write-offs. If your business meals and entertainment deductions fall far outside the norm, expect a closer look.
How to Avoid It: Limit deductions to eligible business-related meals and avoid personal or lavish expenses. Always log who attended and the business purpose of each event.
2. Claiming a Home Office Without a Clearly Defined Space
Trigger: Home office deductions are legitimate, but claiming a portion of your home without a dedicated workspace can prompt scrutiny.
How to Avoid It: Make sure the space is used exclusively for business, not doubling as a guest room or living room. Take photos and measurements and maintain documentation of how often the space is used.
3. Inconsistent Venmo or Cash App Transactions
Trigger: With the IRS ramping up efforts to monitor third-party payment processors, sending or receiving large sums without reporting related income can raise flags.
How to Avoid It: If you’re receiving payments for services or goods through apps like Venmo, Cash App, or PayPal, make sure to report that income — even if the platform doesn’t issue a 1099-K. Keep clear records separating personal from business transactions.
4. Round Numbers on Expense Reports
Trigger: Filing expenses that consistently end in “.00” or are rounded to the nearest hundred looks suspiciously tidy to IRS algorithms.
How to Avoid It: Use exact figures based on real receipts and logs. Keep detailed records and avoid estimating unless it’s backed by clear documentation.
5. Deductions That Don’t Match Your Income Level
Trigger: If you’re claiming tens of thousands in deductions while reporting minimal income, that imbalance could prompt an audit.
How to Avoid It: Ensure your deductions align realistically with your income. If your business has a loss, document it thoroughly with receipts, logs, and explanations.
6. Excessive Charitable Donations
Trigger: Donating large amounts to charity compared to your income can look suspicious — even if it’s from the heart.
How to Avoid It: Keep letters of acknowledgment from charities, donation receipts, and appraisals for non-cash donations. Be ready to explain any unusually large gifts.
7. Frequent Schedule C Filers with Low Income and High Deductions
Trigger: Sole proprietors who consistently report little income, but significant deductions attract attention.
How to Avoid It: Make sure you’re operating a legitimate business with a profit motive. Document client interactions, marketing efforts, and a business plan if needed.
8. Incorrectly Reporting Cryptocurrency Transactions
Trigger: The IRS is tracking crypto activity more closely than ever. Failing to report gains (or even claiming incorrect losses) is a major red flag.
How to Avoid It: Use tools to track your crypto trades, and report all taxable events such as sales, conversions, or staking rewards. Keep logs of dates, amounts, and wallet addresses.
9. Alimony Deductions for Post-2018 Divorces
Trigger: Tax law changes in 2019 eliminated the alimony deduction for divorces finalized after December 31, 2018 — but some filers still claim it.
How to Avoid It: Only deduct alimony if your divorce agreement predates 2019 and the payments qualify under the IRS rules.
10. Using Incorrect Filing Status
Trigger: Claiming “Head of Household” without meeting the strict requirements can lead to scrutiny.
How to Avoid It: Only claim Head of Household if you’re unmarried, paid more than half the household expenses, and have a qualifying dependent.
11. Excessive Vehicle Expense Claims Without a Mileage Log
Trigger: Claiming 100% business use of a personal vehicle or high mileage without documentation is a common audit magnet.
How to Avoid It: Use a mileage tracking app or logbook. Record the date, mileage, destination, and purpose of each trip.
12. Multiple Years of Business Losses
Trigger: Reporting a business loss for multiple consecutive years can make the IRS question whether you’re running a business or a hobby.
How to Avoid It: Demonstrate that you’re working to turn a profit — through marketing, business improvements, and revenue goals. Save your business plan and promotional materials.
13. Large Foreign Asset Holdings Without Proper Disclosure
Trigger: If you have offshore accounts or assets valued over $10,000, you’re required to file FBAR or FATCA forms.
How to Avoid It: Work with a tax professional to ensure compliance. Report foreign bank accounts, trusts, and investments accurately.
14. Claiming Dependents Already Claimed by Someone Else
Trigger: If multiple people (such as divorced parents) try to claim the same child, the IRS will audit to verify eligibility.
How to Avoid It: Coordinate with the other parent or guardian and always follow the rules on who qualifies to claim the child based on custody and support.
Avoid IRS Audit Triggers & File Your Taxes with Confidence
In 2025, the IRS is smarter, faster, and more thorough — so playing it safe isn’t just good practice, it’s essential. The best way to avoid an audit is to be truthful, transparent, and prepared.
If you’re unsure about your return or need expert help navigating complex deductions and audit risks, Anderson Bradshaw Tax Consulting is here to help. Our seasoned tax relief professionals specialize in proactive tax strategies and audit defense, giving you peace of mind no matter your situation.
Don’t wait for a letter from the IRS — schedule your consultation with Anderson Bradshaw today and take control of your taxes before they take control of you.
Call us at 877.550.3911 or visit www.AndersonBradshawTax.com to learn more.
