IRS audit

Selecting tax returns for IRS audit

The IRS has many processes for selecting tax returns for IRS audit. There are several reasons why a tax return is selected for an IRS audit. Some of the reasons for selecting tax returns for IRS audit are outlined below:

  • statistical analysis using DIF score system (DIF analysis)
  • IRS matching programs
  • IRS special projects on various occupations or professions
  • informant tips
  • evidence of criminal activity that produces probable unreported income (drugs, gambling, prostitution, etc)
  • random audits
  • tax returns with prior IRS audits history

In the tax reform act 1998, Congress enacted Internal Revenue Code IRC 7217 and made it a crime for most executive IRS branch members to interfere with an IRS audit . This tax law is at least a start to reassuring tax payers that IRS audits or the threat of an IRS audit will not be done for any improper purpose. Click below to read about various methods of selecting tax returns for IRS audit.