The DIF score is the most widely used method
for selecting tax returns for IRS tax audit. There are also
other methods to select tax returns for IRS audit. Since DIF
score is used often by the IRS raising IRS audit flags, we
shall discuss how DIF score works to gain an understanding of
the DIF score system.
What is a DIF score?
DIF score or the discriminate function
system is the name the IRS calls the computer generated score
the IRS uses to select tax returns to undergo IRS audits.
The majority of audited income tax returns are selected by
means of DIF score.
How is DIF score generated?
The DIF scores are generated by IRS
computers. DIF score is a statistical profile that is
computed by comparing the tax numbers (income, expenses, and
deductions) on income tax returns with numbers generated using
national statistics for tax payers in a similar income tax
Computing DIF score
The real formula of how to compute DIF score
is not revealed by the IRS. However, contributing factors to
computing DIF score can be found on tax payers' tax
An example of item on tax return used to
compute DIF score is a loss on a sole proprietorship
business (found on schedule C of the tax return). If these
numbers or expenses are out of line with the numbers
shown on DIF analysis, then the chances of an IRS
audit increase. DIF score and DIF analysis is one of
many factors the IRS uses to determine if an IRS audit is