Colorado Springs, Colorado (PRWEB) October 10, 2012
IRS audits are simply a way of life, but understanding some audit trigger might minimize a taxpayer’s exposure:
Random: The percentage of random IRS audits is very low, but still exists.
Computer Scoring: All tax returns are scored by the Discriminant Function System (DIF). The system rates the potential for adjustments based on historical data and past IRS experience.
In other words, the IRS rates their ability to increase a taxpayer’s tax liability and subsequent tax due. The IRS is a business, and wants to earn a profit so-to-speak when committing resources.
The variables and formulas used to determine a DIF score is as secure as the Coke formula, but here are some focus areas according to other tax professionals and media outlets-
Information Matching: Most W2s and 1099s are electronically transmitted to the IRS. If a tax return is missing a W2 or 1099, or if the amount reported is different than the amount the IRS has in their database, the tax return will be adjusted or audited.
Related Examination: If a business partner’s individual tax return is examined and a particular issue or transaction is discovered, other partners’ tax returns might be examined as well. This is not limited to business partnerships- any transaction or agreement between taxpayers that causes a taxable event on two different tax returns might trigger an audit if one tax return shows a discrepancy.
The Watson CPA Group is a progressive tax consultation and preparation firm embracing internet technology to provide worldwide tax service from offices in Colorado Springs, Colorado USA. A secure online Client Portal allows remote taxpayers to exchange financial information, tax documents and tax returns saving valuable time and resources.
Since 1997, The Watson CPA Group prepares individual and corporate tax returns for a flat fee, and specializes in LLCs, small business taxes, pilot and flight attendant tax deductions, rental property owners and expatriate tax clients.
For more information visit http://www.watsoncpagroup.com.