Not all IRS Audits turn out bad. Sometimes there aren't any changes and in some cases, the taxpayer will receive a REFUND!
Historically about 1% or less of tax returns are selected for audit.
Below is a list of how tax returns selected for audit.
🏁-The IRS screens tax returns using Discriminant Index Function, which is a data analytics program. The program assigns each tax return a numeric score. There is a high potential that if a return is selected because of a high score, that there will be a change to the taxpayer's income tax liability.
🏁-Information sent into the IRS by 3rd parties, ie W-2's and 1099's, does not match the information on the tax return.
🏁-There may be a questionable treatment of an item on the tax return.
🏁-The IRS may receive tips from outside sources on potential noncompliance with the tax laws or inaccurate filing. The source of these tips can come from individuals, newspapers or public records.
Being proactive will lessen the chances of being audited. Preparing a tax return correctly will limit the possibility of being audited. ALWAYS keep a copy of all the documentation used to prepare a tax return, even all those pesky receipts.
Candace Stevens, CEO/President of
Number Cruncher LLC
Any audit is about collecting information and verifying whether certain laws, rules, standards have been maintained. Tax audits are conducted to verify whether the tax laws have been complied or not. Taxes are the most important aspect of accounting practices. Outsourcing your taxation requirements to a global accounting outsourcing provider will help your business in multiple ways.
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