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How does the IRS choose who to audit?

Each year during tax season, we receive questions from many Georgia taxpayers about IRS audits. In particular, individuals and small business owners want to know what they can do to minimize their risk of being audited. While there is no way to completely avoid an audit, being accurate when completing your tax filings should help. Accuracy will also work in your favor if the IRS selects your tax return to audit.

Following are the primary methods the IRS uses for audit selection:

  1. Random selection: Your return could be randomly selected based on a statistical formula.  
  2. Computer screening: Other formulas compare your tax return to others in similar situations and identify major variances from the average.  
  3. Document matching: Your return may be selected if a form such as a W-2 or 1099 does not match the numbers reported on your return.  
  4. Related examinations: If you are doing business with an individual or organization that has been selected for auditing, your return may also be audited.

Generally, the IRS is looking for people who are cutting corners or not being honest. By staying organized throughout the year, keeping proper documents to substantiate your deductions and working with the same tax professional annually, you will be fully prepared in the event of an audit.

Keep These Red Flags In Mind

While no one knows exactly what numbers will trigger an IRS audit, tax professionals widely believe that the following factors may play a role:

  • Math errors and using round numbers
  • Missing 1099 forms
  • Omitting additional income, including cash earnings
  • Claiming a high amount of charitable donations (relative to income)
  • Excessive Schedule C losses (self-employed business expenses)
  • Claiming a home office deduction

Forming a long-standing relationship with a skilled tax attorney will not only help you minimize your taxes, it can also ensure that your assets are protected and provide you with peace of mind if you are selected for an audit.

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5855 Sandy Springs Circle N.E., Suite 190
Atlanta, GA 30328

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The Peck Group, LC

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Located in Atlanta, The Peck Group, LC, represents clients nationwide. Regionally, we are committed to serving clients in Fulton County and throughout the state of Georgia.