Every tax return is audited; here’s why…

Every tax return is audited; here’s why…

The fear of getting audited is real, and produces anxiety and stress for many taxpayers all year round. However, the fact of the matter is a systematic computer program audits every tax return to determine if human intervention is necessary.  Some possible reasons for an audit of your income tax return:

  • Statistical data, or Discriminant Inventory Function (DIF) - A computer scoring program written with IRS data, DIF will red flag any return outside of the statistical ranking guidelines.
  • Red Flag Deductions – Certain deductions that are highlighted by the IRS to get automatic flagging.  The home office deduction and hobby expenses have been considered red flag deductions. 
  • Third-Party Information - Anyone who may have had an interaction or relationship with the taxpayer, but now has an issue. These could be unhappy ex-spouses, upset business partners, friends, or neighbors.
  • Related Examinations – The IRS could select your return for examination when other taxpayers, who have had an interaction or relationship with you, have had their return examined. Such relationships could include business partners, family members, or friends. 
  • Information Mismatching – When payers report information that does not match the information you have reported on your tax return.  Examples include employer W-2, 1099 forms from financial institutions, 1999-Misc for contractor work, or Schedule K-1 from partnerships or S Corporations.

 

For further information on this topic and how to keep the auditors away from your return, contact your tax experts at Delgado & Associates.

 
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