Released: February 08, 2007

Five tax audit red flags

Source: Christian Zappone, CNNMoney.com

The IRS conducted 1.3 million audits last year, up more than 5 percent from the year before. And now, President Bush’s recently released budget calls for a step-up in efforts to close the $300 billion “tax gap,” the difference between what is owed in taxes and what is collected.

Any way you look at it, more tax audits may be on the way. Here are five red flags the IRS is likely to watch out for this tax season.

Earning too much money. It’s a problem most people would probably love to have, but high earners should be aware that they’re more likely to end up on the IRS’s radar, according to David Sands of Buchbinder, Tunick and Co.

Sands says once an income tops $100,000, the chances start increasing.The emphasis on flagging high-net-worth filers makes financial sense from the IRS’s perspective.

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