Some tax mistakes cost you a little money. Others get you audited, and a few can land you in federal prison. In this episode of IRS War Room, Melinda Tolbert breaks down the tax mistakes most likely to get you audited by the IRS, including improper child tax credit claims, unreported gig and side income, improper home office deductions, incorrectly claiming the earned income tax credit, and failing to report cryptocurrency income. She explains the difference between an honest tax mistake and tax fraud, why filing exempt every year to avoid withholding is fraud, and what fraud can cost you, from penalties of up to 75% of the unpaid tax to fines of up to $100,000 and prison time. For taxpayers and business owners, the lesson is simple: if it's income, report it, and if you don't qualify, don't claim it. Listen to this episode of IRS War Room: 5 Tax Mistakes That Will Get You Audited By The IRS Key Takeaways: A mistake and fraud are not the same thing. An honest error is one thing, but knowingly withholding information or filling out forms incorrectly to get a benefit is fraud. That includes filing exempt every year just to avoid federal withholding. All income has to be reported, 1099 or not. Gig work like Uber and Instacart, eBay sales, and other side income all belong on your return, even if no 1099 was issued. The IRS is going to find out. The home office deduction requires exclusive business use. Overstating the square footage inflates your deduction, and claiming a shared family space as business only is intentional deception. If the room isn't used exclusively for business, don't take the deduction. Tax credits come with clear qualification rules. The child tax credit and the earned income tax credit have defined criteria for who qualifies and how much they can claim. If you fall outside those rules, claiming the credit puts you at risk of tax fraud. Crypto is income, and it needs to be reported. The IRS has decided virtual currency counts as income. Unreported transactions can lead to interest, penalties, and in some cases criminal charges, so work with a tax professional who actually knows current tax law. Key Points: 00:00 Introduction 00:58 What tax fraud actually is 01:43 Why filing exempt every year is fraud 02:01 Penalties for committing tax fraud 02:30 Mistake #1: improper child tax credit claims 03:09 Mistake #2: failing to report all your income 03:39 Why no 1099 does not mean no reporting 04:08 Mistake #3: improper home office deductions 04:48 When a home office claim becomes fraud 04:48 Mistake #4: incorrectly claiming the earned income tax credit 05:26 Who qualifies for the earned income tax credit 06:16 Mistake #5: failing to report crypto income 06:32 The IRS decided crypto is income 07:30 Why your tax preparer needs to know tax law 08:04 Final takeaways Melinda Tolbert, EA, is the CEO of MJ Tax Relief Group and a nationally recognized expert in IRS collections and payroll tax issues. Her practice focuses on challenging IRS problems, including audits, collections, and appeals, helping small business owners and taxpayers regain control of their finances. Connect with Melinda: Instagram: @melinda_tolbert Facebook: MJ Tax Relief LinkedIn: Melinda Tolbert Website: melindatolbert.com
