K2S, PC

IRS Random Audit Program

Jul 18, 2007 | Posted in News

A recent article in the Wall Street Journal reported on the IRS’s latest initiative to revive its random audit program. The article (found “here”: http://online.wsj.com/article/SB118169532238233324.html) explains the program and offers tips about what to do if you are selected. It’s worth reading.

You may wonder what the real purpose of the random audit program is and how returns are selected for audits other than the type described in the article. The process is enlightening.

When you file your tax return, it is “scored” by the IRS; the amounts are compared with norms for people in your particular line of work and in your income bracket. If your score exceeds a predetermined number — determined by a top secret formula — you will be selected for audit. If parts of your return exceed the norm, for example, your charitable contributions are $10,000 when the norm for your income bracket is $500, you may also be selected for audit.

We are sure you have figured it out by now. Where does the IRS get its “norms” in order to score the returns received? It used to be from the TCMP program (taxpayer compliance measurement program). These audits were brutal; the taxpayer had to prove his name, address, social security number; produce birth certificates for the children, and marriage license, if married, as well as document every item on the return.

The new program promises to be a bit less brutal as the previous one; however, its purpose remains the same: to gather data needed to formulate the norms. The best advice we can provide to you if you are selected for this type of audit is to pick up the phone and call us. Handling the audit yourself will take a considerable amount of your time, cause you undue stress, and may result in an unexpected outcome, i.e., you owe more tax. Our fees for the service should eliminate the undesirable activities for you.

In any case, enjoy the “article”: http://online.wsj.com/article/SB118169532238233324.html and feel free to call or “email”:mailto:mrenkes@k2scpa.com us with your comments or questions.

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