Picture two real estate professionals sitting across from an auditor.

One reports $250,000 in income, keeps clean books, reconciles every 1099, and can walk you through every deduction without blinking. The other reports $80,000, claims a big vehicle deduction, a home office, travel, meals, and is showing a loss for the third year running.

If the IRS could only pull one return this year, which one do you think gets picked?

That's really the question I want you sitting with, more than "will I get audited."

There's no secret IRS list ranking professions or income brackets. I get asked about this constantly, and the honest answer is that it's less about what you make and more about whether you can back up what you claimed. Some returns just naturally invite more questions than others. Here's where I see it happen most.

1. Big Schedule C deductions without the paper trail

Agents, brokers, wholesalers, property managers — anyone self-employed in this business — this one's for you.

A large vehicle deduction, a home office, travel, meals, advertising, equipment... none of that is inherently a red flag. Real businesses have real expenses.

But say you're bringing in $70,000 and claiming $35,000 for vehicle use, plus a home office, plus travel and meals, plus an overall loss. At that point someone's going to ask you to prove it. Vehicle deductions need mileage logs and business-use records. Home office has its own rules you actually have to meet, not just claim.

I'll say it plainly: the deduction isn't the issue. Not being able to back it up is.

2. Flippers who deduct everything the year they spend it

This one trips people up more than almost anything else I deal with.

Say you buy a property for $200,000 and put another $75,000 into renovating it. Most people's gut instinct is "I spent $75K, I deduct $75K, this year." Makes sense on the surface. It's often wrong.

If you're operating as a dealer — meaning the property's held primarily to sell, not to hold — the IRS treats it as inventory, not a capital asset. Which means those renovation costs typically get added to your basis, not written off the day you pay the contractor. If your books have been deducting reno costs immediately when they should've been capitalized, your numbers could be off in a way that actually matters.

Bookkeeping for flippers isn't just "did I make money." It's "when does this cost actually hit my taxable income."

3. Losses, year after year after year

Look, businesses lose money. That's not news. Startups lose money for years before they turn a corner, and plenty of real estate deals just don't pan out the way you hoped.

But if you're several years deep into losses and nothing about how you're running things has changed, that starts to look like something else. The IRS actually has factors they look at here: are you keeping real books, are you running this like a business or a hobby, how much time are you actually putting in, is there a genuine effort to turn a profit.

Three losing years doesn't mean an audit letter is coming. Three losing years plus sloppy records plus no visible attempt to fix anything — that's a different story.

4. Cash businesses

Salons, restaurants, bars, car washes, contractors who get paid cash on the side of a job.

Nothing wrong with running a cash business. But cash doesn't leave the same paper trail a 1099 does, so your own records end up carrying more weight than they would otherwise. If $20,000 in cash lands in your bank account, your books should be able to say where it came from. And if cash never makes it to the bank at all, it still needs to show up somewhere as income. POS reports, deposit slips, invoices — keep them. They matter more than people think.

5. 1099 workers whose numbers don't line up

Drivers, consultants, agents — anyone on a 1099 has income the IRS already knows about before you file. That's actually the easy part to get caught on. Platform reports $90,000, you report $50,000 — that gap is not hard for anyone to spot.

The part people underestimate is the expense side. It's not enough to claim the deduction. You have to be able to defend it if someone asks.

What it comes down to

None of these five things, by themselves, means trouble. The riskiest return isn't the one with the biggest deduction on it — it's the one where the income doesn't add up, the write-offs are aggressive, the records are thin, and if you asked the person "how'd you get to this number," they couldn't really tell you.

A $30,000 vehicle deduction with a mileage log behind it is fine. A $30,000 vehicle deduction because "I drove a lot last year" is not the same thing at all.

So what's the actual takeaway

Take your deductions. Seriously — don't leave money on the table because you're spooked. That's not what I'm telling you here.

What I am telling you: the bigger or more unusual the position, the more you should have backing it up. Don't aim for a return that just looks safe. Aim for one you could actually defend if someone picked up the phone and asked how you got there.

If you're reading this and you're not sure you could answer that question about your own return, let's talk about it now, before it's the IRS asking instead of me.

Best,

Waqas “Vic” Hussain, CPA
Whitestone CPA
Based in Chicago. Serving clients nationwide.