Tax Returns are audited by the IRS for different reasons. You can reduce the chance of a IRS tax audit by having tax professionals prepare your tax return.
As a Former IRS agent, I have observed thousands of tax returns. The basic rule used by the IRS is simply this, ” does the tax return make sense.”
The IRS DIF scoring is the main reason a tax return is sent to the field for a tax audit.
DIF Scoring
The IRS scores every tax return with a discriminate function (DIF) number. It is based on calculations the IRS uses to identify by classification all income and business tax returns with the highest likelihood of tax change on audit.
The DIF scores are tied into gross income vs deductions taken. If you fall out of the national averages the likelihood of a tax audit increases. Each tax return processed get assigned a DIF number. A IRS Tax Examiner, Tax Auditor or Revenue Agent manually reviews each tax return to ensure its worthiness of a IRS tax audit. We have on staff a former IRS reviewer.
Mathematical Corrections
The IRS processes all tax returns through there Master Computer System. Each tax return is input line item by line item by the IRS. The computer verifies the accuracy of the tax return. If there was a mathematical error, IRS will simply send out a tax adjustment and expect the adjustment notice if correct to be paid in full.
Income Document Matching – There are 1.4 million income tax returns audited via IDM
The IRS uses computers to find mismatches between names, social security numbers, 1099’s, earned income credits,withholding tax errors. IRS will simply send out a IRS notice or letter to advise the taxpayer of the mismatch. You have the opportunity to contact IRS if the information is incorrect. If you fail to respond to the IRS within the allotted time, IRS will make the adjustment to your return.
TCMP – Taxpayer Compliance Measurement Program
This type of tax audit is the most extensive by far, as it thoroughly examines tax returns line by line. This is called by practitioners the ” pain the butt tax audit or the tax audit from hell.” Every line item is audited by the IRS. This audit is conducted by the IRS to determine the areas of abuse. As a result of this type of tax audit, the IRS gathers the results and formulates areas of tax abuse.
Market Specialization Program
These are business tax audits where the IRS concentrates on a business industry.The IRS has trained agents to have an extensive knowledge about every aspect and have become industry experts in that field and are aware of tax avoidance issues.
The following is a short list of some of the industries with Market Specialization:
Aerospace Agency,
Architects and Landscapes,
Art Galleries , Attorneys, Lawyers,
Cash intensive, restaurants, beauty hair, laundry mats,
Child Care,
Insurance Industry
High Dollar Taxpayers.
Two other high target programs with the IRS are high dollar taxpayers and those taking tax credit deductions.
The odds of a IRS tax audit for High Dollar taxpayer is extremely high and for those taking tax deductions should be aware that IRS is placing indicators in CADE 2 to prevent tax abuse for erroneous tax credits.
If you need IRS tax audit help, call us today. 1-866-700-1040
