What is an audit trigger?

An audit trigger refers to specific factors or transactions that increase the likelihood of a taxpayer being audited by tax authorities. These triggers could include discrepancies in reported income, unusual deductions relative to income, or significant changes in financial behavior from one tax year to the next.

Tax authorities often rely on statistical models and data analytics to identify patterns that suggest potential noncompliance or irregularities in tax filings. By recognizing these indicators or "triggers," they prioritize which returns to audit based on the perceived risk of errors or fraud.

Understanding audit triggers is crucial for taxpayers and tax professionals, as it helps them review filings and ensure compliance, thereby reducing the chances of triggering an audit.