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What Triggers An IRS Audit?

Tax Forms
Justin Sullivan, Getty Images

Have you ever been audited by the IRS? I have, and let tell you, it’s not fun. There are some things to consider to prevent having to go thru this unpleasant situation.

The IRS examined 1.1 percent of all individual tax returns in 2010 and 2011, so the chances that your tax return will be audited are only about 1 in 90.

But the odds of an audit can increase substantially depending on your income, types of income, deduction amount and changes you have made since filing your last tax return.

The IRS uses a computerized process to check all tax returns for math and clerical errors. The IRS also runs tax returns through a process that compares the information you report from your bank, employer, W-2, 1099 and other forms and documents. If you omit an item from your tax return, it’s very likely to be picked up by the IRS’s computers.

Meanwhile, the IRS assigns numerical weights to certain tax return characteristics. These weights are added together to obtain a national composite score for all tax returns. When the total score of all selected items on your tax return exceeds the national average score set by the IRS, the agency will flag the return for a possible audit. The exact items the IRS zeroes in on and scoring method is a closely guarded secret, but some of the things the agency is believed to scrutinize include:

  • Large amounts of income not subject to tax withholding
  • Unusually large amounts of deductions claimed than seem reasonable when compared to your income
  • A large number of dependent exemptions claimed that doesn’t square with reported SSN’s, tax withholding allowances and so forth
  • Large deductions for charitable contributions, casualty losses, home office expenses, and travel and entertainment expenses
  • Indicating a change of address when not reporting a sale of your residence and not changing your home related deductions

You may be tempted to write off that family vacation as a business trip, but it’s not worth it if it earns you a visit from the IRS.

I talked with a CPA in Sioux Falls that I trust with my tax preparation, Duane DeBerg of DeBerg Enterprises on South Duluth Avenue. I asked Duane, a veteran in the business, what is the one thing for sure that you don’t want to put on your tax return?

His answer was, ‘Don’t list large amounts of mileage or entertainment expenses unless you have the logs to back it up.’


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