The word “audit” is enough to send a shiver down any taxpayer’s spine. While the odds of a full-blown IRS audit are very low, certain errors and discrepancies can cause the IRS computers to flag a return for review. For seniors with new and varied income sources, being aware of these tax audit red flags is the key to filing a clean, accurate return that sails through the system without a hitch. This guide outlines the top red flags and how to avoid them.
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Red Flag #1: Mismatching Income Information
The Problem: This is the most common audit trigger. The IRS has a powerful automated system that compares the income you report on your tax return to the income reported to them by payers on forms like W-2s and 1099s. If you forget to report income from a 1099-R (pensions/IRAs), a 1099-INT (interest), or a 1099-DIV (dividends), the computer will flag the mismatch instantly.
How to Avoid It: Be patient. Wait until you have received ALL of your income documents before you start filing. Create a checklist of all expected forms (SSA-1099, 1099-R from each pension/IRA, etc.) and check them off as they arrive. Double-check that the numbers on your return match the numbers on the forms exactly.
Red Flag #2: Claiming Abnormally High Charitable Contributions
The Problem: The IRS systems have data on average charitable donation amounts for different income levels. If you claim a deduction for charitable giving that is exceptionally large compared to your reported income (for example, donating $25,000 on a $50,000 income), it can trigger a review.
How to Avoid It: Documentation is your best defense. Keep meticulous records of every donation. For cash gifts, you need a bank record or a written receipt from the charity. For large non-cash donations (like a car or artwork) over $5,000, you will likely need a formal appraisal and must file Form 8283.
Red Flag #3: Taking a Large Medical Expense Deduction (Without Proof)
The Problem: The IRS knows that seniors often have high medical bills. Claiming the deduction itself is not a red flag. The flag is raised when the deduction is very large and you lack the records to substantiate it if asked.
How to Avoid It: If you plan to claim this deduction, you must operate as if you will be audited. Keep every single receipt, pharmacy printout, doctor’s bill, and Explanation of Benefits (EOB) statement in a dedicated folder. Maintain a mileage log for every trip to a medical appointment. If the IRS sends a letter, you’ll be able to respond immediately with organized proof.
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Red Flag #4: Failing to Report RMD Income Correctly
The Problem: Your IRA custodian reports your Required Minimum Distribution (RMD) to the IRS on Form 1099-R. If you take the distribution but fail to report it as taxable income on your Form 1040-SR, it creates a direct income mismatch that is easy for the IRS computers to catch.
How to Avoid It: Always report the gross distribution from your traditional retirement accounts as income. The only exception is if you use a Qualified Charitable Distribution (QCD), in which case you report the gross amount but show a taxable amount of $0 and write “QCD” on the form.
Red Flag #5: Sloppy Returns and Simple Math Errors
The Problem: Obvious errors like incorrect Social Security numbers, math mistakes, or forgetting to sign a paper return can cause the IRS to take a closer look. While these often result in a simple notice rather than a full audit, they still create delays and headaches.
How to Avoid It: This is where e-filing is your best friend. Tax software eliminates math errors, checks for common mistakes, and won’t let you submit your return without a proper electronic signature. If you do file by paper, double- and triple-check every number and make sure you and your spouse (if filing jointly) both sign the return.
Disclaimer: This article is for informational purposes only and is not a substitute for professional tax advice. If you have a complex tax situation or are concerned about a potential audit, it is highly recommended that you consult with a qualified tax professional.
