Top Reasons the IRS or California FTB May Flag Your Tax Return

Filing taxes as a self-employed professional, influencer, freelancer, doctor, or small business owner in Los Angeles can feel overwhelming. Beyond just meeting deadlines, many taxpayers worry about something else: what if my return gets flagged by the IRS or the California Franchise Tax Board (FTB)?

While not every audit is cause for panic, there are certain “red flags” that increase your chances of review. Here’s what you should know.

1. Unreported Income

If you receive payments reported on a 1099-NEC, 1099-K, or W-2 and fail to include them on your return, the IRS and FTB will catch it. They use automated systems to match what companies report against what you file.

Example: You get $8,000 from a brand partnership on TikTok (reported on a 1099-NEC). If you don’t include that $8,000, expect a notice.

2. Deductions That Look Too Large for Your Income

Writing off expenses is smart tax planning — but when your deductions look extreme compared to your income, the IRS or FTB may want proof.

Examples:

• Claiming 70% of your home as a “home office.”
• Deducting luxury vacations as “business travel.”
• Reporting $50,000 of income but $45,000 of expenses.

3. Federal & State Returns Don’t Match

The IRS shares information with California’s FTB. If your numbers don’t line up, it can raise red flags.

Example: You claim deductions on your federal return (Schedule C) but forget to report them on your California return.

4. Missing or Incorrect Forms

Simple mistakes can get noticed: leaving out required forms, forgetting to sign, or failing to file an entity return (like Form 568 for California LLCs).

5. Math Errors, Round Numbers, and Typos

It sounds small, but even math errors, Social Security number typos, or reporting only round numbers can draw unwanted attention.

6. High Income or Multiple Businesses

The more money you earn, or the more sources of income you juggle (YouTube, medical practice, e-commerce, rental properties), the higher your chance of being selected for review.

7. Questionable Charitable Deductions

Large donations — especially non-cash gifts like art, crypto, or collectibles — require proper documentation. Without it, the IRS and FTB may challenge your deduction.

8. Home Office Deductions Without Proof

The home office deduction is legitimate, but you need to show exclusive and regular business use. Claiming your living room or kitchen as an office won’t hold up.

How to Protect Yourself

The good news? Being “flagged” doesn’t automatically mean you did something wrong. But you can lower your risk by:

• Keeping detailed receipts, logs, and invoices.
• Reporting all income — even if you don’t receive a 1099.
• Double-checking federal and California returns for consistency.
• Avoiding inflated or unsupported write-offs.
• Getting professional tax planning so you maximize deductions safely.

Work with Experts Who Know the Rules

At Velin & Associates, Inc., we help influencers, creatives, doctors, dentists, and small business owners in Los Angeles navigate complex tax rules. You don’t need to memorize IRS code sections — that’s our job. We’ll help you take every deduction you’re entitled to, while minimizing audit risk and protecting your hard-earned money.

For more information about our tax planning services, contact us today: visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org