Every year around million taxpayers are picked by IRS for tax audit. Isn’t it surprising that out of over 100 million returns only a million get selected for the audit? If you have been selected for the audit, don’t assume that IRS agents have some grudges with you. IRS’ systems select the returns that need to go through the audit. Systems highlight returns with inconsistencies and errors. Sometimes tax payers file taxes with incorrect information about tax relief and tax credits. It could be intentional or the story could be other way round. In both cases, system would highlight the return.
Most common errors that can be founded in most of the tax returns are related mathematical calculations. Handling mathematical calculations is not tough at all; you just need to concentrate and mathematical can be avoided easily. Apart from mathematical errors, other silly mistakes that taxpayers commit are entering incorrect personal details. It doesn’t mean that they are not aware what need to write in personal information field rather they are more concerned about other things such as computation and attaching documents. Therefore, you should recheck the personal details such as social security number, correct name, marital status, age and address that you have filed.
IRS hardly cross check the details you have entered therefore, if you have missed out any of the tax liabilities, penalties and interest will be added in the remaining amount and letter will sent to you by the IRS. Time period to respond would also be mentioned in the letter. You would need to get in touch with the IRS in this time period otherwise IRS is authorized to take severe steps to collect their money. They can garnish your wages, put levy on your properties and other valuable assets and seize your bank accounts.
Documents play a vital role in proving that the relief and credits you are claiming are genuine. However, some taxpayers take tax relief and tax credits an easy way to reduce their tax amount. They claim credits and reliefs for which they don’t have any supporting and their name come under the spotlight of IRS’ systems. Therefore, it is mandatory that your documents should match with whatever you are filing. You must be submitting W-2 and K-2 forms with the return. IRS would cross check the information you have provided on these forms with the issuer(s). In case, information doesn’t match, be ready for the invitation.
IRS picks returns for audit randomly. Afterwards, these returns will be checked thoroughly before sending letter for audit. Selection also based on DIF score. The formula used by the IRS to identify returns that are eligible for audit. Higher the DIF score, more chances of getting audit. Things that can increase your DIF score are extreme fluctuation in your income or deductions, Schedule C expenses etc.