You're Income Tax Return-What the IRS Looks For

When you send your tax return into the IRS on April 15^th, there is a chance of you being audited. Nobody likes to even think about this happening, much less having it happen to them! The public's tax returns are selected for examination (audit, yikes!), by a combination of computer and human determination. You can improve your odds a little bit by not having your tax return selected for examination, but actually the IRS computer program used to determine who is going to be audited is not known by the public, (or at least those not talking).

What we do know is that the IRS computers use a scoring system known as the Discriminant Income Function (DIF). When your tax return is processed, it receives a DIF score. The higher the score of the return, the more likely it will be examined. The formula that the DIF uses to score a tax return is updated regularly by IRS examiners. The public is not informed of the factors that are used in the scoring. Another computer scoring system used is called the Total Positive Income (TPI). This system uses the return's Adjusted Gross Income in deciding the potential for additional tax money if the return is audited.

After the computer analyzes the DIF and the TPI, the human examination comes into play if it is shown that the tax return has a potential for an audit. The return is mailed to the District Office and then manually screened. The examiner then determines if the computer made an error or if there is a cause for examining the return more closely. If there is a red flag, then an examiner will be assigned to the case.