How does the IRS determine if my return will be audited?
The IRS uses various programs and techniques to determine which returns are audited, which include:

Matching programs  Information returns (such as Forms W-2 and 1099) are matched to your tax returns, using your social security and other identifying numbers. Discrepancies usually generate an IRS notice requesting you to explain the differences. Unclear or evasive answers can generate a tax assessment, or you may be summoned to the local IRS office to explain the differences to an auditor.

Statistical analysis  The IRS uses computer software to analyze hundreds of variables to arrive at ratings (called DIF scores) for tax returns. The program compares actual returns filed to "typical" taxpayer profiles. Unusual features, such as higher than average deductions, result in higher DIF scores, which increase the likelihood of an audit.

Occupation  According to the IRS, returns filed by certain taxpayers, such as self-employed individuals and farmers, understate taxable income at a higher than average rate. Therefore, higher percentages of these returns are audited.

You can reduce your chances of being audited by filing an accurately prepared return with appropriate supporting documentation.

How can I reduce my chances of being audited?
To reduce your chances of being audited, make sure your return is accurately prepared. Be sure to attach all supporting documentation to your return for any extraordinary items.

How does the IRS conduct an audit?
The IRS conducts three types of audits:

Correspondence audits are handled entirely by mail. They consist of written questions about apparent errors, such as filing status discrepancies or wages reported on a Form W-2 that do not appear on the wage earner's tax return. If you give unclear or evasive answers it can generate a tax assessment or escalate the case to an office audit.

Office audits begin when a taxpayer is summoned to the local IRS office to meet with an agent. The notification letter specifies the items to be examined and asks the taxpayer to bring certain records to the meeting. Although office audits are generally limited to specific items requested, the agent can expand the scope if the taxpayer's explanations raise additional questions.

Field audits may be conducted at the taxpayer's business or at an accountant's office. All pertinent taxpayer records must be available at the chosen site. The examination will cover all tax-related activities for the years under audit.

Please call us when you receive a letter from the IRS. We have an audit assistance program and can assist you through the process.   




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