Did You Overlook These 5 Tax Issues? They Could Trigger an IRS Audit

Now that April 15 has come and gone, most Massachusetts residents won’t be giving much thought to their taxes until next year. But some may be forced to revisit their federal filings sooner. After tax season, the Internal Revenue Service (IRS) shifts its focus to enforcement, and many taxpayers find themselves facing audits along with the potential for significant additional liability. Learn more from Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

5 Potential Triggers of IRS Audits in 2025

All types of filing mistakes have the potential to trigger scrutiny from the IRS. With that said, some mistakes are more likely to trigger audits than others. Each year, the IRS prioritizes enforcement in certain areas, and when taxpayers’ returns raise red flags in these areas, the next step is often for the IRS to issue an audit letter.

What are the IRS’ enforcement priorities in 2025? Some areas where we expect to see a high level of audit activity this year include:

1. Reporting Taxable Non-Employment Income

Many taxpayers earn non-employment income. This includes not only income from working as an independent contractor, but also income from gaming, gambling, and investing. Under the Internal Revenue Code, U.S. taxpayers generally have to report their worldwide income from all sources, and, in many cases, third parties such as rideshare and delivery companies, casinos, brokerage firms, and cryptocurrency exchanges must report their contractors, clients, or users’ earnings as well.

2. Accurately Calculating Itemized Deductions

Taxpayers can often substantially reduce their federal tax liability by itemizing their deductions. However, itemizing deductions can trigger scrutiny from the IRS as well. When itemizing their deductions, taxpayers must do so based on real numbers, and they must be prepared to substantiate their claims to the IRS when necessary.

3. Properly Claiming Tax Credits and Exemptions

Taxpayers also need to be careful to ensure that they are accurately claiming credits and exemptions. Last year, the IRS issued several warnings about false information related to credits and exemptions being spread on social media (here is an example). Even if taxpayers unknowingly rely on bad advice, they remain fully liable for the federal taxes they owe.

4. Small Business and Self-Employed Tax Compliance

The IRS recently launched a Small Business and Self-Employed Tax Center, which provides compliance resources for small business owners and self-employed individuals. Its Small Business/Self-Employed Division has also been particularly active in recent years. Given the IRS’ recent focus on compliance in this area, we expect to see a significant number of small business owners and self-employed individuals facing audits in 2025.

5. Offshore Disclosure Compliance

The IRS has also recently prioritized enforcement in the area of offshore disclosure compliance. Taxpayers who own offshore bank accounts and other foreign financial assets need to report these assets to the federal government annually (subject to minimum value thresholds); and, if they fail to do so, this can trigger scrutiny from the IRS as well.

Request a Call with Boston Tax Lawyer Kevin E. Thorn

If the IRS audits your tax returns in 2025, engaging experienced defense counsel will be the first step toward avoiding unnecessary penalties. To request a call with Boston tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, give us a call at 617-692-2989 or inquire online today.