The IRS only audits about 2% of the tax returns it receives, so if you can avoid certain red flags, you should be able to avoid an audit. Here are some deductions that are likely to catch its eye.Noncash charitable donations can raise IRS eyebrows. It’s easy to assign too high of a value to the donation. Be conservative, unless you have clear proof to validate a large valuation. Losses on real estate investments must not come from passive investments, and you must be able to prove it. If you’re collecting rent on a property and take a loss, claiming the deduction may be a problem. Travel, entertainment and food deductions are possible for business owners, but they must be reasonable. Make sure they pass the business purpose test, which entails being able to prove their main purpose was for business. Hobby losses will pique the IRS’s attention. Deductions taken for a business that routinely loses money may compel the IRS to reclassify it as a hobby. Business owners must prove they depend on the income their business generates. S corporation wages are scrutinized closely. The IRS makes sure salaries meet market rates. If they don’t, the IRS may say the corporation is simply trying to avoid paying taxes. And unreimbursed employee business expenses tend to be abused. Workers can only deduct them when they exceed 2% of their adjusted gross income
