What reasons would a tax authority have for conducting an audit?

What Factors Could Trigger an IRS Audit of My Tax Returns?
How Does the Tax Agency Decide Who to Audit?

There are a few reasons, including mathematical errors, claiming numerous charitable operations, claiming several losses on your Schedule C, reporting partial income, claiming several business expenditures, and claiming deductions for a home office.

Understanding the criteria used by the tax agency when selecting audits could help diminish the likelihood of being audited, as a significant number of taxpayers who undergo audits tend to have suspicious elements in their tax returns that trigger further examination. For instance, if an individual declares income or expenses significantly deviating from the national averages. The tax agency has access to a vast number of tax returns, enabling them to generate standard averages and employ statistical models applicable to various business sizes and types. Moreover, the tax agency pays close attention to significant fluctuations in income and deductions. If your revenue experiences a sudden and considerable decline, you can be certain that the tax agency will take notice and intensely scrutinize your itemized deductions. Similarly, if the information reported on your tax return, such as W2 and 1099s, does not align with third-party reports, you are likely to be selected for an audit.

Some audit selections are completely arbitrary, while the majority result from the reporting of items on Schedule C, such as expenses, deductions for home office, specific business expenditures, or miscalculations.