5 Factors IRS Considers When Screening Tax Returns for Audit |
Posted: December 14, 2017 |
1. Obtaining InformationThe IRS obtains information about companies and individuals who promote or are participants in tax avoidance transactions. For instance, the agency could pursue individuals who are donors of real estate or investors in tax shelters. 2. Computer ScoringThe IRS uses computer scoring, in which each return gets a numeric score. The two types of scoring systems used by IRS are -
Related: A Brief Guide to IRS Tax Appeal, Issues, and Relief3. Information MismatchThe third criterion used by IRS to select a return for audit is the information mismatch. There could be situations where a disparity is present in the reports such as Form 1099 or Form W2 from the employer. The IRS will look for such returns and select them for audit. 4. Big CorporationsBig corporate houses perform several hundred or even thousands of transactions, which makes them the focal point of IRS. The agency will examine returns of these businesses to ensure that all the transactions are accounted and filed on the return. Issue with the ReturnIf there’s an issue with the taxpayer’s return or transaction of another taxpayer is included by mistake in the return, the IRS will examine it. The agency might audit both the returns as there is a possibility that both the taxpayers could be investors, business partners or family.
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