For many individuals, filing their taxes is a yearly, stressful occurrence spent worrying about being selected for an audit by the Internal Revenue Service (IRS). Only a small percentage of tax filers are chosen for an audit, but the prospect is still stress-inducing. According to the leading Honolulu accounting firm, Tudor Wilson & Associates CPAs, the IRS uses specially designed software that looks for specific tax return items that it views as potential red flags. Here are three things that may increase your chances of being chosen for an audit.

3 IRS Audit Red Flags Explained by Honolulu's Top Accounting Firm

1. High Income

The more you earn, the higher the chance that your return will be selected for an audit. Their reasoning behind this is that taxes become increasingly more complicated as incomes rise. With more complex filings comes more room for error, which is why the IRS takes a greater interest in these cases. The same goes for anyone who's experienced a drastic increase in income from the previous year.

2. Not Reporting All Taxable Income

Many individuals rely on their employer to take out the necessary taxes and supply them with a W-2 form at the end of the year. However, sole proprietors and freelance contractors are often responsible for taking care of their taxes on their own, relying on 1099s at the end of the year.

As your own boss, it's important that you view your income as combined and not only job-specific because all the companies that you've provided services to will also send a 1099 to the government. Even if one job resulted in less 400 dollars (the minimum taxation amount for contractors), the IRS considers your overall income for the year and not on a job-by-job basis. Since the system has already been provided information on your income through 1099s, failing to claim the full amount will alert the system.

3. Large Deductions

Large deductions may also catch the attention of the IRS. There is no exact number as to what size of deduction will catch the attention of the system because it is based on the average deduction size for your particular tax bracket. Some donations also require you to file specific forms, so failing to complete the proper paperwork while still including the deduction on your return is considered a red flag. Regardless of your tax bracket, don't avoid making charitable donations or claiming your deductions simply to avoid an audit. Instead, just make a point to keep track of all your paperwork—or work with an accounting professional..

Make sure you're prepared for an IRS audit by working with Tudor Wilson & Associates CPAs. The Honolulu accounting firm offers thorough tax preparation services to make sure you receive every deduction and credit that you deserve. In the event of an audit, the team will represent you and stand behind their work. Learn more about their services online or by calling (808) 592-2000.