I already answered that [u]here[/u] in a reply to your other post. It’s just looking at the digital amplitude and showing POTENTIAL clipping.
It doesn’t know if your preamp (or other analog circuitry) clipped while recording or if clipping occurred somewhere else. You can import a clipped digital recording and it won’t show clipping if it’s clipped below 0dB. Or you can import an MP3 or floating-point WAV that goes over 0dB without clipping and Audacity will show red.
It LOOKS like there’s something wrong with your hardware* but you may be able to prevent the clipping by lowering the level. That’s just something you’ll have to try (if you can adjust the analog level). It looks like peaks at -3dB or less would be OK. You never told us anything about your hardware setup.
And again, there’s no problem with leaving headroom and amplifying digitally after recording… That’s the normal process with digital recording.
***** It’s a very-minor problem if you know about it and if you can prevent it by lowering the volume. If the analog-output from your cassette player is clipping and it doesn’t have a volume control then you can’t fix it (unless you get a different cassette player).
The same is true if you have a cassette player with USB built-in. With those things you can’t adjust the analog signal into the built-in ADC so that can’t be fixed either.