Audit Selection

There are many misconceptions about the ways that the IRS selects a potential client for review and audit. The stories range from your return being audited because you electronically filed, or audited because you filed an extension or audited because of when you filed your return. These are all just myths. The IRS has long held to selecting clients for audit based upon three criteria including:

Random selection (effectively you and everyone else who file are all put into the population and a certain number are randomly selected). This selection mode is purely random and is without thought or prejudice to any particular income, profile, or industry.
Dif test (a Dif test is a statistical analysis test based upon your income on whether your deductions are in line with what would be normal given your income, position, business, etc. Those whose test results are outside the norm indicating a higher probability of risk/revenue generation are therefore selected).
If you are in a certain industry that the IRS is having substantive collection issues, then you will be more at risk than if not. By auditing a larger percentage of taxpayers in a problem industry class, the IRS is most apt to enforce collection issues as well as to begin to bring effective and wholesale compliance.

Many will shy away from certain deductions because of a fear of being audited. Although clearly no one desires to be audited as both the administrative burden and potential economic burden of an audit are more than enough to be considered as well as the emotional stress. However, I believe all clients should never not take a deduction they are legally entitled to as otherwise they are overpaying their taxes and paying more than their fair share. However, in serving the truth, we can trust that the truth, regardless of an audit environment or not, will indeed set us free.