The IRS is very protective of the computer application
algorithm that it uses to detect whether a taxpayer is a good target
for an audit. Court cases have been fought over getting a copy
of the program so that taxpayers can know whether they are likely to
be audited. Therefore, we can't tell you the criteria that the
IRS might use to decide if you are a good candidate for an audit or
what constitutes a suspicious tax return or tax situation. Below
are some common sense reasons why we believe the IRS might want to target
you for either a Deficiency Notice or an audit.
Below are a some common sense situations where we believe the IRS might
want to send you a Deficiency Notice.
- Taxes not paid in previous years are still owed.
- Amount of federal tax paid for the year is inconsistent with
income reported by employers, resulting in an underpayment.
- Amount of federal tax paid for the year by employer does not
cover 1099 forms received on taxpayer, resulting in an underpayment.
Below are a few common sense situations where we believe the IRS might
want to target you for an audit or tax examination.
- Taxpayer previously filed 1040 forms and paid tax and stopped
- Wage income is high (over $100,000)
- 1099 Income is high or comes from over 10 sources.
- Multiple overseas bank accounts appearing on return.
- Multiple large transactions over $10,000 reported to IRS (law
requires transactions over $10,000 to be reported, to prevent money
- Amount of deductions are too high.
- Alternative Minimum Tax (AMT) is applied.
- Income is significantly less than last year's.
- Received W-2's from employers that had a nonzero amount for
block 10 "Wage, salary, tips, and other compensation" but no 1040
- Received no W-2 or a zero amount for wages, salaries, tips,
and other compensation, even though taxpayer has filed and paid
income taxes for the past several years.
- Taxpayer does not sign return or provides inaccurate information.
- Taxpayer files a frivolous return. This might include the word
"duress" in the signature block of the 1040, in violation of the
Jurat amendment, which will incur a $500 fine.
- Taxpayer writes a letter to the IRS raising any of the USC 861/source
issues identified in this document or asks IRS what law it is that
requires them to pay income taxes on domestic income as a U.S. Citizen.