Does The Irs Compare Tax Returns? Yes, the IRS does compare tax returns to ensure accuracy and compliance with tax laws. At compare.edu.vn, we help you understand how the IRS uses various methods to verify the information reported on your return, helping you avoid potential issues and penalties. Discover how data matching and other comparison techniques safeguard tax revenue and promote fairness.
1. What Happens When The IRS Audits Tax Returns?
An IRS audit involves a thorough review and examination of an individual’s or an organization’s financial records and accounts. This process ensures that the information reported on tax returns is accurate and compliant with tax laws, verifying the correctness of the tax amount. The audit serves to confirm the accuracy of reported income, deductions, and credits.
2. Why Might My Tax Return Be Selected For An Audit?
Selection for an audit does not necessarily mean there is an issue. The IRS employs several methods to select returns for audit:
2.1 Random Selection and Computer Screening
The IRS uses statistical formulas to select returns. Tax returns are compared against established “norms” for similar returns. These norms are derived from audits of a statistically valid random sample of returns as part of the National Research Program (NRP). The IRS uses this program to update the return selection information, improving the efficiency of the audit process.
2.2 Related Examinations
Your tax return may be selected if it involves transactions or issues with other taxpayers (e.g., business partners or investors) whose returns have been selected for audit. This ensures consistency across related financial activities and helps detect discrepancies that might otherwise be missed.
