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3 tax missteps that may increase your audit risk

Only a small percentage of California taxpayers wind up having the IRS audit them, and the vast majority of Americans who are the subjects of audits end up participating in the audits via mail, rather than in person. However, there are certain actions you might take when filing your tax return that may increase the chances of the IRS taking a closer look at it.

Per Kiplinger, taking any of the following three missteps may increase the odds of the IRS auditing you.

1. Failing to report all your income

This may be the easiest way to raise a red flag with the IRS. The IRS receives the same documentation about your income that you do, so if you fail to report some of it, the IRS is likely to recognize your failure to do so and may audit you because of it.

2. Taking too many business deductions

If you are a self-employed professional, how much you write off in business expenses may impact your audit risk. More specifically, you may receive unwanted attention from the IRS if you are a sole proprietor and your Schedule C gross receipts exceed $100,000.

3. Dealing with virtual currency

Cryptocurrency is surging in popularity across the nation. The IRS is ramping up its efforts to identify taxpayers who fail to report income from digital currency transactions.

If the IRS does decide to audit you, try to avoid panicking. Only a small percentage of taxpayers wind up having field audits, which are the type that involves IRS agents visiting you at home, at work or both.