I Asked ChatGPT Which Tax Mistakes Seniors Make That Can Trigger an IRS Audit — Here’s What It Said
Written by
Angela Mae Watson
Edited by
Rebekah Evans
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
According to an IRS report, just 0.40% of individual tax returns are audited. Still, nobody wants to deal with an audit.
This is especially true of seniors who are either looking forward to retirement or are already trying to enjoy their golden years in peace.
Unfortunately, some common tax mistakes seniors make can trigger an IRS audit. Here’s what they are, according to ChatGPT.
Most Common IRS Audit Triggers Seniors Make
As per the artificial intelligence (AI) tool, these are the main triggers of an IRS audit for senior taxpayers.
- Failing to report all retirement income: This includes 1099-R distributions from IRAs or 401(k) accounts, pension income, taxable Social Security earnings and investment income. Even a minor mismatch in figures could trigger an audit.
- Incorrectly reporting required minimum distributions: RMDs from traditional 401(k) or IRA accounts are generally required at age 73, per the IRS. There may be up to a 25% excise tax on any amount not taken. Some seniors roll over funds incorrectly or don’t fully understand inherited IRA rules. This could lead to a potential audit.
- Claiming excessive charitable donations: Certain donations are tax deductible, especially if you itemize. But claiming too large of a deduction, especially if there aren’t receipts or proper valuations involved, could trigger an audit.
- Inflating medical expense deductions: Taxpayers can deduct unreimbursed medical and dental expenses exceeding 7.5% of their adjusted gross income (AGI), per the IRS. But including non-qualified or reimbursed medical expenses could cause trouble with the IRS. The same goes for anyone claiming non-medically necessary home improvements.
- Claiming large business losses: Certain business expenses are tax deductible as ordinary expenses. But seniors who’ve started their own business or side hustle should be cautious. Claiming repeat losses or misclassifying hobby expenses as business ones could spell trouble.
- Rental property investment errors: The IRS lets you deduct certain rental property expenses from your income, but not all. Common audit triggers include miscalculating depreciation, claiming personal use as business use and failing to report rental income properly.
- Filing status errors: Those age 65 and over can claim an additional standard deduction of $6,000 (single filers) or $12,000 (filing jointly), per the IRS. This is on top of their usual standard deduction. But double-claiming dependents or head of household status when you don’t qualify as such could be flagged.
- Math or income discrepancies: Even accidentally moving a single decimal point could trigger an audit. But errors in reported income can do the same. So can reporting an unusually low tax liability when your income is otherwise rather high (especially common with capital gains).
And one of the biggest triggers? Incorrectly reporting Social Security benefits.
“One of the most common issues I saw at the IRS was incorrect reporting of Social Security benefits,” said Camishe Golden, enrolled agent (EA) with Wiggam Law and former IRS revenue officer. “Taxpayers sometimes forget to include Form SSA-1099 income or misunderstand how much of their benefits are taxable.”
Golden corroborated that other common mistakes — like taking large charitable donations without proper documentation or unreported income — can also result in an audit. Unreported retirement income might include IRA withdrawals or part-time gig work.
“The IRS receives matching information from banks, brokerage firms and employers,” Golden said. “If income on your return doesn’t match what the IRS already has, that’s when notices and audits can start.”
More From GoBankingRates
