Insight

Should you be Worried about an IRS Audit?

Now that you’ve likely filed your 2018 tax return, one troubling afterthought may come to mind: Could I get audited? The mere notion strikes fear into most people’s hearts. And for good reason — under a worst-case scenario, an audit could take up lots of your time, create an enormous amount of stress and leave you with a hefty bill from the federal government in unpaid tax, penalties and interest.

Now let’s take a deep breath. An audit can also be a rather routine process that results in zero additional liability or even a refund. What’s more, the IRS is performing audits much less frequently than it used to.

Basically, the higher your income and more complex your return, the greater the likelihood that it will be audited. The IRS uses something called a Discriminant Inventory Function (DIF) score to rate the potential for change in a return, based on past IRS experience with similar returns. The agency also uses an Unreported Income Discriminant Index Formula (UIDIF) score to rate each tax return’s potential to indicate unreported income.

If you happen to be a business owner, the IRS may subject your return to intensified scrutiny in years it decides to target a category that your company falls into. Examples might include sole proprietorships with many cash transactions or companies that rely heavily on independent contractors.

By and large, the answer to the question posed in our headline is: Probably not. The best way to prevent a targeted audit or prepare for one you can’t avoid is to get sound guidance from a CPA before filing your return every year.

© 2019

Related Insights

Nonprofits and insurance: Getting it just right | accounting firm in cecil county md | Weyrich, Cronin & Sorra

Non-Profits

Nonprofits and insurance: Getting it just right

Whether you’re starting up a not-for-profit organization or your nonprofit has existed for years, you may have questions about insurance. For…
Questions you may still have after filing your tax return | quickbooks consulting in hunt valley md | Weyrich, Cronin & Sorra

Tax Prep, Planning & Strategy

Questions you may still have after filing your tax return

If you’ve successfully filed your 2022 tax return with the IRS, you may think you’re done with taxes for another year. But some questions…
4 tax challenges you may encounter if you’re retiring soon | quickbooks consulting in elkton md | Weyrich, Cronin & Sorra

Tax Prep, Planning & Strategy

4 tax challenges you may encounter if you’re retiring soon

Are you getting ready to retire? If so, you’ll soon experience changes in your lifestyle and income sources that may have numerous tax implications. Here’s…

Connect with us

Use the form below to send us an email. WCS responds directly to all inquiries and general questions within 24 hours of posting.

This contact form is deactivated because you refused to accept Google reCaptcha service which is necessary to validate any messages sent by the form.