IRS Red Flags ~ Errors that May Increase Your Chance of Being Audited


Failing to report all taxable income, you and your 1099 – MISC, can signal an IRS red flag and increase your chance of being audited.


The IRS gets copies of all 1099s that you receive and they match the numbers on the forms with the income shown on your return. A mismatch sends up an IRS red flag.


It is your responsibility to keep accurate books and records, but don’t ignore the 1099s you receive. Add up all the 1099 – MISCs you receive. If the 1099s are higher than the income reported on your books, you will be hearing from the IRS.


How could those 1099s possibly be higher, if your books are accurate? It could happen in one of a few ways:

  1. They could have paid you in the last few days of December 2011. Many businesses pay off bills at the end of the year, so they can deduct the expense. The check gets to you in the new year as income. If this will cause a shortage of income, you may want to date the receipt of the check to 12/31.
  2. In some instances, your client or customer paid you via a credit card or PayPal or similar payment system. A new form, the 1099K will be reporting the income received by credit card. The 1099-MISC they sent you could include credit card income that was reported on the 1099K.
  3. The 1099-MISC you received is flat-out wrong.  Errors happen.


To avoid the chance of being audited and to stop an IRS red flag here is what do when the 1099s are too high and your books are correct:

  • If you receive a 1099 showing income that isn’t yours or listing incorrect income, get the issuer to file a correct form with the IRS.
  • If the correction doesn’t happen the: Report the full amount that’s on the 1099. The IRS computers will be looking for those numbers. Then, deduct the amounts that are wrong. Include a statement explaining why you are taking that deduction or making that correction.


For more information about IRS red flags or decreasing your chance of being audited go to our Facebook Page and message us, or send an email request to


Jennifer Thompson
(715) 559-4664

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