How does the IRS determine who to audit?

Question

I am pretty sure it is not random? Do they look at your adjusted gross income (agi) and compare it to the average deductions for everybody with a similare agi and audit you if you deviate too much from everybody else?

Answer 1

You are absolutely right that it is not, on the whole, random. The IRS computers run programs that identify inconsistencies and obvious errors on tax returns. For example, if you have paid $25,000 tax and you claim to have earned $30,000 in the year, the computer will know that one of those numbers is wrong.

The programs also contain huge amounts of information about tax trends. So, for example, if the program knows that a person with your level of income on average makes charitable contributions of $500 a year and you claim on your filing that you dontaed $5,000, that will trigger a possible audit.

The key things that will trigger an audit are 1) obvious inconsistencies in the filing numbers and 2) the numbers being significantly out of step with statistical "averages".

Answer 2

There are random audits and those have to be the worst. Most returns that are audited are "kicked' out by a computer because "something" is out of kilter from the norm. This can be income as well as deductions. Just because your return was kicked out doesn't mean you will be audited. An employee of IRS will go over your return and if there are reasons or explanations for the numbers to higher or lower, the return usually will not be audited. An example would be someone who moved to another state during the year and had a substantial deduction for other than cash under contributions, such as furniture, appliances, clothes, etc. It would make sense that the person who moved would give more to charity that year. One word of advice. If you are audited, ONLY TAKE THE PAPERS WITH YOU THAT IRS HAS REQUESTED!! Do not help IRS find something else. Do not bring other years returns nor anything else they haven't ask for. Unless its a random audit, you will receive a letter questioning only one or two areas of your return, only bring that documentation with you. That is all that is required.

Answer 3

There are a few different triggers. The first is the random audit which is the worst; they go through and require substantiation for every single entry on the return starting with your name and social security number. The second is triggered because something on your return is out of synch with most taxpayers; e.g., you deduct $50,000 in charitable deductions, but only earned $75,000. The next audit is when you make a mathematical error on your return or overlook an item which you should have included; e.g., earned income credit. This type of audit is usually handled by a letter of correction; sometimes you don't even have to respond.

Answer 4

Primarily based on the DIF score, which is a scoring mechanism applied to all tax returns. SOME, but very few returns are slected randomly. MOST are based on how far from an expected norm certain items are. For example, if you made $200,000 in a small business (sole proprietor) and you are an engineer, but netted only $10,000 including meals expenses of $30,000, you have several items that are out of whack, which cause a high DIF score.

If you grossed $18,000 as an engineer and netted the same $10,000 with only $300 of meals expense, you have a lower DIF score, but the same income as the other case. This is less likely to be audited.

There are many factors, but this is the most common one.

Another one that causes audits is when there is a personal tax return with over $10,000 refund. This one is almost an automatic audit.

WealthBuilder
Enrolled Agent

Answer 5

The IRS has a program that selects returns for audit. It's a closely guarded secret what the parameters are, but for the most part they focus on areas known to have a high rate of errors or fraud.

There is also a program where returns are selected totally randomly, but this is a comparatively small percentage of the total returns audited.

Answer 6

Whoever are the political rivals and enemies of those who make important government decisions.

Answer 7

random auditing from computer