IRS Examinations

There are various reasons why your return may be selected to be examined. First, the IRS has a computer program called “Discriminant Inventory Function System (DIF)”, which assigns numeric scores to each individual and some corporate tax returns after they have been processed. Depending on your numeric score (if it is quite high), your return will most likely be examined.  

Second, the IRS receives information from 1099s and W-2s showing what you earned throughout the year.  If your reported income is lower than what is reported on these forms received by the IRS, then your return will most likely be examined.   

Third, the IRS can select your return randomly when engaged in a study to assess the treatment of an item on your return and to study the behavior of similar taxpayers in handling the tax issue.

Finally, the IRS can select to examine your return if they received information from other sources on potential noncompliance with tax laws or inaccurate filing. Basically, the information may come from sources such as newspapers, public records, or individuals.  There is a possibility that communication with the collection division over tax information could also lead to an examination.