Because the IRS is only able to examine a very low percentage of returns, it follows a policy of examining returns which, upon preliminary inspection, indicate the largest possible source of potential tax deficiency. Various weights are assigned to separate items on each tax return, thus permitting the ranking of returns for the greatest potential error.
This chapter discusses what may trigger an audit and how you can handle an audit if your return is selected for examination.
Also discussed in this chapter are various penalties the IRS can assess if you file an inaccurate return, and the penalties for not reporting your foreign financial accounts.
The odds are quite low that your return will be picked for an audit. In fact, for Fiscal Year 2012 (October 2011 through September 2012), audit rates were slightly lower than in the year before for all income groups. Overall, only 1.03% of individual returns filed during 2011 were audited in FY 2012, compared with an audit rate of 1.11% in FY ...