IRS Audits: 8 Triggers and Tips to Help You Survive

Ever wonder how the Internal Revenue Service selects which taxpayers to audit? Well, it isn't always a matter of chance. There are certain factors that can make your tax return stand out from the rest.

The IRS pays more attention to some returns than others, so it's important to understand the factors that may elevate the likelihood that auditors take an interest in your situation.  If you're audited, you may have to make additional payments for invalid deductions or expenses. It's easy to make mistakes when filing your taxes, so be sure to keep all your documentation in case you get audited.

Here are eight potential red flags that could trigger the scrutiny of the IRS — and tips to help you survive an audit.

1. High incomes. Your chance of being audited substantially increases once your income crosses $200,000, according to a recent IRS report on its enforcement activity.

2. Large itemized deductions. Deduct every penny you're entitled to — but realize that if your itemized tax deductions are bigger than the IRS' target range for people at your income level, your return may get a second look.

3. Home offices. You can only take a home office deduction if you meet all of the qualifications, including regularly and exclusively using part of your home as your principal place of business. For example, if your office doubles as the kids' playroom, you're generally unable to deduct it. For details, see IRS Publication 587.

4. Missing investment income. You know the IRS Form 1099 that financial services companies send you that summarizes your interest and dividends for the year? The IRS also gets that information. Make sure your return properly includes this information.

5. Incomplete returns. If your return is missing a few pieces, the IRS may wonder what else you forgot.

6. Business losses. In a tough economy, business losses are more common — but that doesn't mean the IRS won't double-check them. Make sure your expenses are legitimate and eligible to be deducted and that your business isn't just a thinly disguised hobby.

7. Charitable deductions. You'll need a canceled check or dated receipt for any cash contributions, and contributions of $250 or more require written acknowledgement from the charity. If you made a noncash contribution valued at more than $5,000, you'll need an expert appraisal to back up your claim.

8. Medical expenses. If you're 64 or younger, you can deduct these costs only to the extent they're greater than 10% of your adjusted gross income. It's important to keep detailed records. Remember, you can't deduct the cost of over-the-counter medicine, health club dues or most cosmetic surgeries.

If you're doubtful about the decisions you're making when completing and filing your tax return, consider hiring a professional. Spending money for expert guidance today could help you avoid paying increased taxes and penalties tomorrow.