|
Being selected for an audit can depend on many factors. State or Federal tax audits can be provoked by errors, omissions, complex transactions and even random selection. Some of the most common triggers for a possible audit include:
1. Home-office deductions
2. Business losses and hobbies
3. Noncash charitable contributions
4. Excessive deductions
5. Earn too much... or too little
Internal Revenue Service (IRS) Examination selection criteria. Your return may be selected for examination on the basis of computer scoring. A computer program called the Discriminant Inventory Function System (DIF) assigns a numeric score to each individual and some corporate tax returns after they have been processed. If your return is selected because of a high score under the DIF system, the potential is high that an examination of your return will result in a change to your income tax liability.
Your return may also be selected for examination on the basis of information received from third-party documentation, such as 1099 and W-2 that does not match the information reported on your return. Or, your return may be selected to address both the questionable treatment of an item and to study the behavior of similar taxpayers (a market segment) in handling a tax issue.
In addition, your return may be selected as a result of information received from other sources on potential non-compliance with the tax laws or inaccurate filing. This information can come from a number of sources, including newspapers, public records, and individuals. The information is evaluated for reliability and accuracy before it is used as the basis of an examination or investigation.
|
