IRS Examination of Your Tax Return - Selection Criteria - Publication 556 - John R. Dundon II, Enrolled Agent
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IRS Examination of Your Tax Return – Selection Criteria – Publication 556

IRS Examination of Your Tax Return – Selection Criteria – Publication 556

As detailed in IRS Publication 556 your tax return may be examined for a variety of reasons, and the examination may take place in any one of several ways. IRS Examination for the most part is needed to address both the questionable treatment of an item and to study the behavior of similar taxpayers (a market segment) in handling a tax issue.   Otherwise IRS Examination selection criteria is determined:

  1. On the basis of computer scoring. A computer program called the Discriminant Inventory Function System (DIF) assigns a numeric score to each individual and some corporate tax returns after they have been processed. If your return is selected because of a high score under the DIF system, the potential is high that an examination of your return will result in a change to your income tax liability.
  2. On the basis of information received from third-party documentation, such as Forms 1099 and W-2, that does not match the information reported on your return.
  3. As a result of information received from other sources on potential noncompliance with the tax laws or inaccurate filing. This information can come from a number of sources, including newspapers, public records, and individuals. The information is evaluated for reliability and accuracy before it is used as the basis of an examination or investigation.


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