REASONS WHY THE IRS CAN CHOOSE YOUR TAX FORM FOR AUDIT

After you submit the tax form to the IRS, you may receive a reminder from the IRS to inform you that the tax form will be audited. You may ask, why is my tax form selected? Below we will introduce 8 reasons why the IRS might choose your tax form for audit.

 

MATHEMATICS CORRECTION TAX CHECKING METHOD

This tax check method is usually to find out the problem through a computer program, for example: your name or social security number is incorrectly filled; unqualified families erroneously applied for low-income family benefits concessions; the amount of estimated tax or withholding tax was entered incorrectly; the estimated tax penalty or interest amount was incorrect, etc. Sometimes the IRS will arrange time to interview you on these issues, or the IRS will send you a tax form that they think is the correct amount, and the corresponding bills to be paid, asking you to pay. But even if the IRS sends you the bill, you still have the right to meet with the IRS within 30 days to prove that the amount of the tax form you filled out is correct.

 

THE INCOME AND RELATED DOCUMENTS MATCH THE TAX INSPECTION METHOD

This tax check method is usually to compare your tax form with all relevant tax forms with name and social security number through a computer program, such as your w-2, 1099 form, K-1, etc. If the IRS passes the above comparison and finds that you have not declared all your income, they will draw out your tax form for audit. The IRS may send you a letter asking you to call to arrange the interview time; or directly arrange the interview time and ask you to attend on time; or they may directly send to you the correct tax bill and the amount of tax that needs to be paid. Then taxpayers are required to pay the corresponding taxes. Similarly, within 30 days, taxpayers still have the right to interview the IRS to prove that their declared income is correct.

 

DIF SCORE TAX CHECK METHOD

The Internal Revenue Service IRS has its own scoring system that will give each tax form a DIF score. A DIF score is a mathematical technique used to score income tax returns for examination potential. The higher the score, the easier it is to audit. That is if the DIF score is above the national average, then there is every chance the IRS will contact taxpayers for audits. The specific scoring principle has not been disclosed, but according to what has been observed, this scoring system is adjusted every year. For example, because taxpayers are more likely to make mistakes on the items with the largest changes in tax law that year, correspondingly, if you have income or deductions on these items, your score will be higher. Conversely, on some items, for example, because hiring a professional accountant to file a tax return will reduce the chance of errors, and accordingly your score will be lower. The IRS will review tax forms with high DIF scores and select which items on the tax form need to be audited based on the scores.

        

CHECKING TAXES BY LETTER

This tax check will require you to provide relevant supporting documents for certain items on the tax form and send them to the staff of the Internal Revenue Service. The more common related documents include the receipt or payment certificate of the deductible item. For example, if you have a charitable donation that can deduct your taxable income, you need to provide a copy of the charity’s receipt and a copy of the bank’s check to prove the number of donations on your tax form Really effective. If you cannot provide the corresponding receipt, the IRS will send you a ticket, and the amount of the ticket will include the penalty and interest for the tax owed to you.

ON-SITE TAX INSPECTION METHOD IN THE OFFICE

In recent years, this face-to-face tax inspection method has become increasingly common. Because of pressure from the US Congress on the Internal Revenue Service, tax inspection rates have increased substantially in recent years. Before the IRS comes to the office, the taxpayer may first receive a phone call or letter from the IRS requesting the taxpayer to actively provide the relevant information required by the IRS. During the on-site tax inspection of the IRS, the IRS will focus on the items that may be under-reported on the tax form. If the result of the tax check is not satisfactory, your chances of being asked to check the tax again in the next quarter will increase.

 

METHOD OF SPOT CHECK

In order to improve the speed of tax inspection by the IRS, the IRS will randomly select some tax forms for inspection. This spot check plan was named “National Research Program”, which is another plan after the Taxpayer Compliance Measurement Program (TCMP). This kind of tax checking is considered to be the most basic and in-depth way of tax checking. Every item on the tax form, every line will be checked. For example, if you are a child’s guardian and you enjoy tax concessions, the IRS will require you to provide the child’s birth certificate to prove that the child is your child and prove that the child is with you during the tax season.

 

CHECKING THE FINANCIAL SITUATION

This tax investigation focuses on the taxpayer’s living standards and other factors that are not directly related to tax reporting. The tax inspector of the Internal Revenue Service will use public records and statistical data to track changes in expenditure and wealth to prove whether taxpayers have undeclared income. The inspection records include credit reports, real estate tax records, business license applications, vehicle management authority records, 1099 form information, bank transaction records, and securities and exchange commission (SEC) related files. Since Congress believes that the IRS has been suspected to misuse these materials, the IRS has been restricted from using this method of tax inspection since 1998, unless the IRS already has reasonable indications that taxpayers may have undeclared income.

 

TAXATION METHODS FOR SPECIAL ITEMS OF THE INTERNAL REVENUE SERVICE

The IRS selects 12 of the worst tax fraud cases every year, and selects the areas to be tax-checked according to this list. It is not so bad to receive a letter from the IRS. Just ask an experienced tax professional or tax preparer or Tax Attorney to help you deal with it, so that the client does not need to face an official of the IRS.