While the Internal Revenue Service (IRS) and California Franchise Tax Board (FTB) (the government) conducts a small number of their tax audits randomly, most government audits target tax payers for specific reasons. Most audits are not random. While the formula is not made public, the following factors can help you determine whether the government will be coming after you:

• The more income you earn, the more likely it is that you will be audited. High income earners are as much as eight times more likely to be audited than those with average incomes.
• If your income was earned from self employment, you are over three times more likely to be audited than if you work as an employee.
• If your deductions don't match your industry, you are likely to be audited.
• If you give large charitable contributions to your church, synagogue, other place of worship, or other charitable organizations, you are twice as likely to be audited by the government.
• If you are self employed and take a home office deduction, you are nearly three times more likely to be audited.
• If you make an error by failing to report 1099 income and the government detects the mismatch, your chances of being audited are more than three times higher.
• If you claim 100% business use of a vehicle, your chances of being audited by the government are nearly three times higher.
• If you own rental property, you are almost three times more likely to be audited.
• If you claim a deduction for rental property losses, your chances of being audited double.
  
• If you take deductions for business meal expenses you are almost four times more likely to be audited by the government.
• If you own and operate a business that accepts a high percentage of cash, your chances of being audited are more than four times higher. Examples are hair salons, cleaning services, gardening services, handyman services, restaurants, home maintenance services, and vending machine operators.
• Writing off a loss for a hobby will increase your chances of being audited by more than 80%.
• Failing to report a foreign bank account with even a small balance is likely to result in an investigation.
• Discrepancies between reported income and your lifestyle is likely to result in an investigation. Your credit card charges may be examined.
• Reporting net business losses in more than one year in five is likely to result in an audit.
• Reporting business expenses in round numbers will more likely result in an audit.
• If you own a business that is taking a large home office deduction and the business has a questionable need for a home office.
• Not issuing 1099s when paying independent contractors.
• If you own assets located in another country.
• If you are claiming a large refund.
• If you are filing an amended tax return and requesting a refund.
• If you have made any large cash deposits.
• If you have previously been audited.
• If you have hired a tax return preparer that has a bad reputation. These preparers usually advertise aggressive tax services.

The list provided above is only a partial list. There are many audit selection factors the IRS and FTB do not make public.

Please be aware that if you claim more than one of the deductions discussed above, your chances of being audited increase.